PRC-1 · Chapter 6 · Question 5 of 100
How should refundable sales taxes (e.g., input VAT) paid on the purchase of a non-current asset be treated in the accounting records?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Excluded from the asset's cost and recorded as a receivable (current asset).
Explanation
Refundable taxes will be claimed back from the tax authorities, so they do not represent a permanent cost to the business. They are excluded from the asset's capitalized cost.
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