Module 9

Question 1

What is the standard rate of VAT?

Answer 1

20%

Question 2

What must VAT-registered businesses do?

Answer 2

• keep records and sales and purchases
• keep a separate summary of VAT called the VAT account
• issue correct VAT invoices

Question 3

What is output VAT?

Answer 3

VAT charged on goods and services by a VAT-registered business

Question 4

What is input VAT?

Answer 4

The VAT. a VAT-registered business may reclaim on business related goods or services.

Question 5

what is the net amount?

Answer 5

amount exclusive of VAT

Question 6

What is the gross amount?

Answer 6

amount inclusive of VAT

Question 7

What are the journal entries for output VAT?

Answer 7

Dr Bank/Trade Debtors (Gross)
Cr P&L- sales(Net)
Cr VAT account

Question 8

What are the journal entries for input VAT?

Answer 8

Dr- P&L -expenses (Net)
Dr -VAT account
Cr Trade Creditors

Question 9

how do you calculate VAT?

Answer 9

1/6*gross

1/5*net

Question 10

What is a VAT creditor?

Answer 10

When output VAT exceeds input, i.e. owe HMRC money

Question 11

What is a VAT debtor?

Answer 11

When input VAT exceeds output, i.e. HMRC owes us money

Question 12

What are the journal entries when a business pays HMRC a VAT balance?

Answer 12

Dr VAT account

Cr Bank

Question 13

What are the journal entries when a business receives a VAT refund from HMRC?

Answer 13

Dr Bank

Cr VAT account