w4 - Lecture Flashcards
What is the primary objective of this session?
Explain how transactions on credit are processed into the ledgers and describe the impact of VAT on ledger accounting
How is a sale on credit recorded in double entry?
DR Receivables control (+ customer) / CR Sales
How is a purchase on credit recorded in double entry?
DR Purchases / CR Payables (+ supplier)
What is the double entry for a receipt related to a sale on credit?
DR Bank / CR Receivables control (+ customer)
What is the double entry for a payment related to a purchase on credit?
DR Payables (+ supplier) / CR Bank
In Sage Cloud Accounting, what happens when details of a sale are entered?
Sage processes double entry automatically
What must be recorded when settlement discounts are given or taken?
Discounts allowed/received must be posted to the general ledger & the receivables or payables ledger accounts
What is Value Added Tax (VAT)?
A tax on the final consumer of a product
What are the standard rates of VAT?
- Standard rated: 20%
- Zero rated: 0%
- Fuel: 5%
What is the difference between output tax and input tax?
Output tax is charged on sales and input tax is paid on purchases
What happens if output tax is greater than input tax?
It results in a liability
What happens if input tax is greater than output tax?
It results in an asset
In VAT accounting, how are bank or receivables/payables ledger figures shown if a business is registered for VAT?
They will be shown GROSS (including VAT)
How does Sage general ledger account for VAT?
Sales tax must be accounted for separately in the general ledger
What is the process for customer invoices using Quick Entries?
Using batch processing
Fill in the blank: The difference between output tax collected and input tax paid out is ______.
payable to or receivable from the tax authority
True or False: Settlement discounts are intended to encourage customers to pay quickly.
True
