Lecture 1: Financial statements &VAT

Question 1

Profit

Answer 1

net sales price- net purchase price

Question 2

When you make a purchase what happens with VAT?

Answer 2

Vat receivable is impacted

Question 3

When you make a sale what happens with VAT?

Answer 3

VAT payable is impacted

Question 4

Is inventory recorded at price including or excluding VAT

Answer 4

Prices net of VAT (excluding VAT)

Question 5

Do trade payables and receivables include or exclude VAT?

Answer 5

Trade receivables and payables accounts include VAT

Question 6

What happens with the balance sheet when using VAT?

Answer 6

creation of VAT receivable and payable accounts
Trade receivables and payables accounts include VAT
Inventory is net of VAT

Question 7

What happens with the income statement with VAT?

Answer 7

VAT does not show up here as it is neither revenue nor expense

Question 8

What happens with the cash flow statement with VAT?

Answer 8

Receipts from customers is included in total sum received and payment on invoice to suppliers include VAT & VAT statements

Question 9

Value added tax (VAT) (6)

Answer 9

When goods are sold, VAT is added to the sales price
A business can reclaim VAT charged to them
A business must pay VAT they receive from their clients
VAT charged by suppliers is not a cost
VAT charged to clients is not revenue
VAT is not included in the income statement

Question 10

(Reporting VAT) when goods are sold

Answer 10

VAT is added to the sales price

Question 11

(Reporting VAT) A purchase of goods and services

Answer 11

Leads to a VAT claim

Question 12

(Reporting VAT) A sale of goods and services

Answer 12

Leads to a VAT liability