ICAEW AF · Chapter 4 · Question 1 of 8
A business registered for VAT sells goods on credit for £2,400 plus VAT at 20%. What is the double entry to record the sale?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Debit Trade receivables £2,880, Credit Revenue £2,400, Credit VAT £480
Explanation
VAT = 20% x £2,400 = £480, so the customer owes £2,880. Revenue is recorded net of VAT at £2,400, because the VAT is collected on behalf of the tax authority. The £480 is credited to the VAT account as a liability (output tax).
More Sales tax (VAT) MCQs
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