Finance Theory Flashcards
What does VAT mean?
Value Added Tax
Who receives the VAT in the end?
Governments
How do you see VAT on the balance sheet?
- VAT Receivables
* VAT Payables
How do you see VAT on the income statement?
You do not
TRUE or FALSE
VAT is an expense for a company
False
TRUE or FALSE
All products have the same % of VAT on top of the sales price
FALSE
TRUE or FALSE
The inventory on the balance sheet is excluding VAT
TRUE
TRUE or FALSE
The trade payable account on the balance sheet is including VAT
TRUE
TRUE or FALSE
The account VAT payable on the balance sheet is a result of sales to customers
TRUE
VAT receivable is …
… an item on the asset side of the balance sheet. It shows the VAT that (needs to be) paid to a supplier which the compant can reclaim/receive from the government
VAT payable is…
an item on the liability side of the balance sheet. It shows the VAT that (needs to be) received from the customer whihc the company needs to pay to the government
What does inventory impact?
Directly impacts balance sheet and income statement, inventory (current asset on the balance sheet) and cost of goods sold (cost on the income statement)
Which two ways can you value inventory?
- Current cost convention
* Historic cost convention
What is current cost convention?
By keeping track of all price changes (impractical, subjective)
What is historic cost convention?
By taking prices from the books, when purchased
What does FIFO mean?
First in First out
What does LIFO mean?
Last in First out
What does AVCO mean?
Average cost assumption
What does periodic mean?
For a whole period
What does perpetual mean?
Per sale made
FIFO or LIFO
Reflects replacement costs more accurately
FIFO
FIFO or LIFO
Not a good indicator of ending inventory value because goods are too old/obsolete
LIFO
FIFO or LIFO
In times of inflation lower profit and inventory valuation
LIFO
FIFO or LIFO
Allowed under both GAAP and IFRS
FIFO