6. Sales, Purchases and Sales Taxes Flashcards
What is the double entry for returns inwards?
Dr Returns inwards (OR Sales if giving credit note)
Cr Receivables
What is the double entry for returns outwards?
Dr Payables
Cr Returns outwards (OR Purchases if given credit note)
What is a credit note?
A note to the customer showing the amount no longer owed
What is a debit note?
A formal request for a credit note to be raised (sent when we return outwards)
How do we account for trade discounts?
Deduct the discount amount before the initial recording of the transaction - no recording is made of the discount itself
What is a settlement discount?
A discount rewarded if the debt is paid by a certain date
Regarding settlement discounts, what amount do we record as the seller?
The amount of sales revenue that we actually expect to receive
What is the double entry for a return to a customer?
Dr Receivables
Cr Cash
What items are shown net of tax in the financial statements?
Sales, purchases, current and non current assets (show value to the business)
What items are shown gross of tax in the financial statements?
Receivables and payables (show full amount of cash paid)
What is the standard rate of tax in the UK?
20% (VAT)
What items may zero rate of tax apply to?
Non-luxury food, children’s clothes and newspapers
What tax values go into the Tax Control Account?
Credit amounts charged on sales (due to authorities) and debit amounts to be recovered on purchases (recoverable from authorities)
How do we get from gross pay to net pay?
Deducting income tax, NIC and pension
What is the formula for total cost of employment?
Gross pay plus employers NIC contribution
