L3- Discounts

Question 1

What is a Trade discount?

Answer 1

Automatic deduction from the list price of an item given by the supplier for bulk purchases.

Question 2

Cash discount

Answer 2

-Discount offered for immediate payment, reducing the payable amount compared to credit purchases

-customers can accept or deny

-the words cash and settlement discount are used interchangeably

Question 3

Settlement discount

Answer 3

Discount given for payment made within a stipulated shortened credit term or period.

Question 4

Reason for cash discount

Answer 4

It can be due to business liquidity issues or concerns about the customer’s ability to meet debts.

Question 5

VAT (Value Added Tax) Sales Tax

Answer 5

-Business can reclaim SalesTax charged on the business when selling goods and services, mostly paid by the customer.
-However some Purchases tax are irrecoverable

Question 6

Std VAT rate UK

Answer 6

The standard VAT rate in the UK is 20%, with reduced rates of 5% and zero rates applicable to certain items.

Question 7

VAT requirements on invoices

Answer 7

Invoices must include the VAT registration number of the business and the Tax Point, which is the date the transaction occurred.

Question 8

What is Input VAT?

Answer 8

VAT charged on purchases of goods and services by a VAT-registered business.

Question 9

What is Output VAT?

Answer 9

VAT charged on sales made by a VAT-registered business.

Question 10

How frequent should VAT return be done?

Answer 10

VAT returns are usually filed every quarter (3 months) within 12 months from the transaction date to avoid late interest, surcharges(2%-15%), and penalties.

Question 10

HM Revenue and Customs (HMRC)

Answer 10

The UK government department responsible for the administration and collection of taxes, including VAT.