Working with VAT Revision Questions

Working with VAT Revision Questions

1)  You are registered for VAT, and pay VAT on a purchase.  Which one of the following statements is true?

1. You owe the VAT amount to the VAT Office
2. It does not affect your accounts
3. You can claim the VAT amount from the VAT Office
4. None of the above

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2)  You make a credit sale that involves VAT.  Which one of the following groups of accounts is involved?

1. Creditors Control, Sales and VAT
2. Creditors Control, Bank and VAT
3. Debtors Control, Bank and VAT
4. Debtors Control, Sales and VAT

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3)  You purchase goods and pay VAT, which one of the following is true?

1. The VAT account is debited
2. The VAT account is credited
3. The VAT account is debited and credited
4. The VAT account is not affected

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4)  The sales price including VAT is called the gross sales amount.

1. True
2. False

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5)  You give a discount to a customer.  Which one of the following statements is true?

1. Your VAT liability is greater than it was before the discount
2. Your VAT liability is unchanged
3. Your VAT liability is less than it was before the discount
4. None of the above

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6)  Which one of the following is the standard rate for VAT in the UK (as at 16-04-2008) ?

1. 10.5%
2. 12.5%
3. 21%
4. 17.5%

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7)  You purchase goods for £1000 net, and sell goods for £500.  The standard VAT rate is involved.  Which one of the following statements is true?

1. The VAT account is not affected
2. Your VAT liability increases by £87.50
3. Your VAT liability decreases by £87.50
4. None of the above

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8)  The balance on your VAT account is £2000 credit.  You purchase goods and the VAT amount is £500.  You return 10% of the purchase.  Which one of the following statements is true?

1. The balance on the VAT account is now £2500
2. The balance on the VAT account is now £1500
3. The balance on the VAT account is now £1550
4. The balance on the VAT account is now £2450

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9)  You recieve a 10% trade discount on goods for which the list price is £500.  The Standard VAT rate applies.  Which one of the following statements is true?

1. Your VAT liability increases by £87.50
2. Your VAT liability decreases by £78.75
3. Your VAT liability decreases by £87.50
4. Your VAT liability increases by £78.75

Answer

Working with VAT Revision Answers

1)  Option (c) is correct.  VAT you pay on a business purchase can be claimed back.

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2)  Option (d) is correct.  You make a sale, so the Sales account is involved.  It is a credit sale, so the Debtors Control account is involved.  You must charge VAT on the sale, so the VAT account is involved.

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3)  Option (a) is correct.  The VAT is a liability account.  You can claim the VAT back on a purchase.  Your liability is decreasing so the account is debited.

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4)  Option (a) is correct.  The VAT is called the VAT amount.  The sales price less VAT is called the net sales amount.

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5)  Option (c) is correct.  You must pass on the VAT you collect from customers.  A discount means you charge the customer less and collect less VAT.  Therefore your liability decreases.

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6)  Option (d) is correct.  This is the Standard VAT Rate.

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7)  Option (c) is correct.  The VAT account is a liability account.  You can claim back the VAT on a purchase (£175), but owe the VAT on a sale of (£87.50).  Your liability is decreasing so the account will be debited.

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8)  Option (c) is correct.  After the return you can claim £450 back, so your liability is decreased by this amount.

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9)  Option (b) is correct.  A trade discount purchase is just like any other purchase.  You pay £450.  The VAT rate is 17.5%, so the VAT amount is £78.75.  You can claim this back, so your liability decreases.

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