Sales Tax
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Chapter 7 title and content Chapter 7 title and content
Sales Tax
Sales Tax
(Value added tax)
(Value added tax)
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Sales Tax
Sales Tax
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77
1 1Sales tax is calculated on such sales
Sales tax is calculated on such sales value that is:value that is: A.
A. Gross of trade discount but net Gross of trade discount but net of cash discountof cash discount B.
B. Gross of trade discount and gross Gross of trade discount and gross of cash discountof cash discount C.
C. Net of trade discount but Net of trade discount but gross of cash discountgross of cash discount D.
D. Net of trade discount and net oNet of trade discount and net of cash discountf cash discount
2
2
Sales tax account is maintained in: Sales tax account is maintained in:
A.
A. General ledgerGeneral ledger B.
B. Purchases ledgerPurchases ledger C.
C. Sales ledgerSales ledger D.
D. None of the aboveNone of the above
3
3
What is the correct way
What is the correct way of calculating sales tax?of calculating sales tax? A.
A. Retail price + VATRetail price + VAT – – Trade discount Trade discount B.
B. Retail price + Trade discountRetail price + Trade discount – – VAT VAT C.
C. Retail price + Trade discount + VATRetail price + Trade discount + VAT D.
D. Retail priceRetail price – – Trade discount + VAT Trade discount + VAT
4
4
Calculate the amount of sales tax
Calculate the amount of sales tax payable by Mr. S under tpayable by Mr. S under the following case.he following case. Assume the tax rate is 17.5%
Assume the tax rate is 17.5%
Sales to Mr. O 470 (inclusive of tax) Sales to Mr. O 470 (inclusive of tax) Sales to Mr. C
Sales to Mr. C (exclusive of tax)(exclusive of tax)
5
5
Purchase account DOES NOT include sales tax as Purchase account DOES NOT include sales tax as it is:it is:
A.
A. Recoverable from tax authoritiesRecoverable from tax authorities B.
B. Not an expenseNot an expense C.
C. Receivable from tax authoritiesReceivable from tax authorities D.
D. All of the aboveAll of the above
6
6
If output tax exceeds input tax than: If output tax exceeds input tax than:
A.
A. Tax is Tax is receivablereceivable B.
Sales Tax
Sales Tax
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C.
C. Tax is Tax is refundablerefundable D.
D. Tax is Tax is adjustableadjustable
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7
If Mr. B purchased “Alpha” worth 10,550 (inclusive of tax) and sold “Beta” worth 20,000
If Mr. B purchased “Alpha” worth 10,550 (inclusive of tax) and sold “Beta” worth 20,000 (exclusive of(exclusive of tax) than calculate:
tax) than calculate:
Input taxInput tax
Tax payable if any to tax authoritiesTax payable if any to tax authorities
Amount that is recorded in sales Amount that is recorded in sales ledgerledger
Amount that is recorded in purchases ledgerAmount that is recorded in purchases ledger
NOTE
NOTE: Assume tax rate of 10% for : Assume tax rate of 10% for both input and output tax purposesboth input and output tax purposes
8
8
Stung which is a registered for sales tax bought furniture on credit terms at
Stung which is a registered for sales tax bought furniture on credit terms at a cost of $8000 plus sales taxa cost of $8000 plus sales tax of $1200. What should be the entry to record this in the books?
of $1200. What should be the entry to record this in the books?
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9
If Mr. Tax has sold goods worth 260,000
If Mr. Tax has sold goods worth 260,000 of which 20% sales were on cash and purchased goods worthof which 20% sales were on cash and purchased goods worth 211,500 of which 30% were on credit than what amounts will
211,500 of which 30% were on credit than what amounts will be recorded in:be recorded in:
Sales accountSales account
Purchases accountPurchases account
Account payablesAccount payables
Account receivablesAccount receivables
NOTE
NOTE: sales and purchases were exclusive and inclusive of tax : sales and purchases were exclusive and inclusive of tax respectively. Assume tax rate is 10% forrespectively. Assume tax rate is 10% for both input and output tax purposes
both input and output tax purposes
10
10
Soldier is registered for sales tax. During the month, he sells goods with a tax
Soldier is registered for sales tax. During the month, he sells goods with a tax exclusive price of 1600 toexclusive price of 1600 to Commando on credit. As Commando is
Commando on credit. As Commando is buying a large quantity of buying a large quantity of goods, Soldier reduced the price bygoods, Soldier reduced the price by 5%. He also offered a discount of another 2% if Commando pays with in 10days. Commando was unable 5%. He also offered a discount of another 2% if Commando pays with in 10days. Commando was unable to pay within 10 days.
to pay within 10 days.
If sales tax is charged at 17.5% what amount should Soldier charge on this transaction? If sales tax is charged at 17.5% what amount should Soldier charge on this transaction?
11
11
A business sold goods that had a net value of $600 to Lucid. What entries are required to record this A business sold goods that had a net value of $600 to Lucid. What entries are required to record this transaction if sales tax is payable at 17.5%?
Sales Tax
Sales Tax
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12 12Laker returned goods that had a net value of 200. What entries are required to record this tr
Laker returned goods that had a net value of 200. What entries are required to record this tr ansaction ifansaction if sales tax is payable at 17.5%?
sales tax is payable at 17.5%?
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13
Which of the following is correct? Which of the following is correct?
1.
1. Sales tax is a form of indirect taxSales tax is a form of indirect tax 2.
2. If input tax exceeds output tax the difference is payable to tax authoritiesIf input tax exceeds output tax the difference is payable to tax authorities 3.
3. Sales tax is included in the Sales tax is included in the reported sales and purchases of the businessreported sales and purchases of the business 4.
4. Sales tax cannot be recovered on Sales tax cannot be recovered on some purchasessome purchases A. A. 1 and 41 and 4 B. B. 1 and 21 and 2 C. C. 2 and 32 and 3 D. D. 3 and 43 and 4