Cash Accounting Scheme

Question 1

Account for VAT

Answer 1

on basis of cash paid and cash received (instead of on standard accruals basis)

Question 2

Advantageous if

Answer 2

have more money tied up in debtors (customers) than in creditors (suppliers).

Question 3

Still pay same amount in the end but

Answer 3

cash flow timing advantage and automatic bad debt relief.

Question 4

Only available if

Answer 4

VAT exclusive turnover does not exceed £1.35m

Question 5

Must withdraw

Answer 5

once turnover reaches £1.6m

Question 6

advantage 1

Answer 6

improved cash flow

Question 7

advantage 2

Answer 7

payment of output VAT only once monies received from customers

Question 8

advantage 3

Answer 8

automatic bad debt relief

Question 9

disadvantage 1

Answer 9

Input VAT may only be claimed once a supplier has been paid

Question 10

disadvantage 2

Answer 10

VAT will be calculated on cash basis, whereas accounts will be calculated on accruals basis

Question 11

disadvantage 3

Answer 11

A growing business will need to change systems once they exceed £1.6m