ICAEW AF · Chapter 4 · Question 3 of 8
At the start of a quarter, a business owed £9,800 to the tax authority for VAT, which it paid during the quarter. In the quarter, output VAT on sales was £38,600 and input VAT on purchases was £21,450. What is the balance on the VAT account at the end of the quarter?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) £17,150 credit (payable to the tax authority)
Explanation
Opening liability £9,800 (credit) - payment £9,800 (debit) + output VAT £38,600 (credit) - input VAT £21,450 (debit) = £17,150. Output VAT exceeds input VAT, so the balance is a credit, a liability owed to the tax authority. Forgetting the payment would give £26,950.
More Sales tax (VAT) MCQs
- Q5A business that is NOT registered for VAT buys inventory for £1,200 plus VAT of £240. At what amount should the purchase be recorded?
- Q6The sales day book for the month shows total net sales of £37,100, VAT of £7,420 and gross total of £44,520. What entry is made in the VAT…
- Q7A VAT-registered business returns faulty goods to a credit supplier. The supplier's credit note is for £960, including VAT at 20%. What is…
- Q8In a VAT quarter, a business made sales of £126,000 excluding VAT. Of these, £18,000 were zero-rated and the remainder were standard-rated…
- Q1A business registered for VAT sells goods on credit for £2,400 plus VAT at 20%. What is the double entry to record the sale?