Introduction to bookeeping - tax/discounts etc for cutomers and suppliers Flashcards
lesson 3 and 4: customer transactions, supplier transactions
what is input vs output tax
Output - VAT on sales. goods/services going out of the business
Input tax - VAT on purchases. Coming into the business
Interaction between business and HMRC over input and output tax
the excess of output tax (VAT you paid for goods) over and input tax (VAT that was charged to you) is paid over to HMRC quarterly. If the input tax (charged) is greater than the output tax (recieved) then HMRC will pay the excess back to the business, usually quarterly
After these two transactions how much VAT is due to HMRC?
- the first question is VAT exclusive. When the business sells the goods, they need VAT to be added onto them at 20%
- Second question is VAT inclusive. The quoted price is the total the busines needs to pay with tax
What is net vs gross
net is before tax, gross is after
What are 3 types of discounts allowed
NOTE- dicounts allowed is a business expense and therefore DR
- bulk
- trade discount - regular customer to encourage buying
- Prompt payment - payment made within certain time
Real world example of trade discount
clubcards
Are trade recievables deducted from net or gross amount
net amount as this is the amount before tax
**You take one calculation off before doing another **
This is a purchase order.
We can make a sales invoice when we take any deductions off (when they pay).
What would be the total amount on the sales invoice
This would be an example of a sales invoice in the sales day book. These companies have purchased this stock from us
Complete the sections
DOG, CAT and other columm must add up to the NET column. They are just different catagories of purchase
total is the amount before VAT
The NET is the total - VAT (why? Is is because the VAT we charge isnt profit and is sent to government)
This is an example of how credit notes are recorded in the sales return book.
This is no different than a sales invoice recording in the day sales book.
How are the credit notes arranged in the day book?
Alphabetical order- so you know if you miss one
NET is always total - VAT
When issuing a credit note for a prompt payment discount, does VAT need to be calcualted on deduction (say deduction is £5.96)
yes - PPD is VAT inclusive, meaning VAT needs to be calculated
What is a part payment recipet
If a customer/ trade rec only covers some of what they owe, you have to allocate only part payment into the accouting software
page 25 remittance advise and matching with ledger
what is an invoice
document details the sale of the goods or services sold
What is remittance advice
sometimes not everything is on here and there is only part payment
recieved alongside payment from someone (a trade recievable)
Is PPD taken off before or after the customer has paid
generally not charged, then taken off later and a credit note invoiced
In the sales / recievables account, VAT and discount allowed is a DR/CR
sales account is for recording who has purchased from the business
DR
not sure why
A purchase day book records invoices we have recived from a supplier
net is always total - VAT
What is discount allowed counted as
ncome as the business is being given something back from its suppliers
discount allowed is getting a discount from supplier
An asset is DR in the ledgers
Anything that increases an asset is recorded as a DR
which is money in and which is out
What would ab/fwd (brought forward) on the debit side of the account mean
the account has money in it (asset). On the credit side this would be a liability.
examples of DR and CR transactions in the bank account table
recieveing money - DR in bank account
Sales is always CR
What recorded things would you not calculate VAT on
-Trade recievables/ trade Payables have VAT already included
-Wages / rates
-Anyone paying an outstanding balance or paying “on account”
-insurance is also VAT exempt
Petty cash equation
float (imprest amount)
float (imprest amount)= amount money in tin + total of vouchers
Which side is money going in and which is out
How would these vouchers be recorded in the table
-what will be the amount of cash withdrawn from the bank to restore the imprest amount
total of petty cash pot = £100
At the end, the balance needs to be brought down
- All go in the credit section (money out)
- all expenses totals £25.85 so that will be the withdrawn amount
- 100 - 25.85 = £74.15
To close this VAT account at the end of an accounting period, where would you put the balance b/f and how much would this be
- first complete the difference (balance c/f) which is on the DR side as it adds up to less than the CR. This balances the account
- Final stage is balance brought forward at the start of the next period. balance b/f always opposite side to c/f
Bank table is DR - money in, CR - money out
CR decreases the asset (or increases the liability)
If John puts £1000 into the buisness bank account, to start a taxi company. This is John putting capital into the buisness. The two accounts for DR and CR would be capital and bank. Are the two enteries DR or CR
BANK, DR - money in, CR - money out (DR increases an asset)
CAPITAL - CR because the business now owes John meaning its an increase in liability
If John bought a car, this will go on the DR side of the car account because it is an increase in asset. Where is the CR inputted
Capital account because it is an asset for the company (its a special liabilty)
