hi everyone, i have a little issue with the question below:
Larissa is a VAT registered trader. She sells goods with a VAT exclusive price of £750 to Exe ltd when the standard rate of VAT is 20%. She does not offer trade discounts but she offers a settlement discount of 5% for customers who pay within 7 days and a 2% discount for those paying within 21 days. Exe ltd pays within 15 days.
What is the correct amount of VAT to be shown on the invoice?
The answer in my book says £142.50, but shouldn't it be £147??
if payment is made after 7 days, but within 21 days then: £750 * 98% = £735 * vat of 20% = vat of £147?
Could anyone please tell me if 142.50 is really the correct answer?
The VAT assumes the maximum settlement discount even if the settlement discount is not used. Therefore, 750*.95*.2 = £142.50
HTH,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Easy done as it makes no sense that the government actually want less money than is really due to it but hey ho if this was logical and all made sense then everyone would be able to do it!
all the best with your staudies,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
You calculate the VAT at the discounted amount whether or not the discount is taken. So the answer of 142.50 is correct. It's a weird one to get your head around when you are studying this.
On this invoice you would work the VAT out on the 750*5% = 37.5 , 750-37.5*20% = 142.50.
It's like your involved in tax fraud and its dead exciting but the VAT man gets his money in the end.
Someone shall hopefully come along and explain why, but i'm sure you can look this up on HMRCs website.
Looks like it's been a very quiet day on the site today.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
mmm, twice the size of the clare finch book for less than half the price.... I'm intrigued espechially as some of the dummies books are not actually that bad (don't like the disposable quality of the paper they use though).... Wonder why the German version is 60 pages longer?
Anyway, yes, cheers matey I think I'll order that one as well (can never have enough books).
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Any diagram that would mean changing a picture is still in English. Doesn't effect us but that's a pretty shoddy porting to a foreign language.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Rhianrach wrote:Quiet must mean the world of bookkeeping and accounting is running smoothly for a day which is a good sign.
Or everyone is running up and down corridors waving their hands above their heads and screaming in anguish.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Rhianrach wrote:Quiet must mean the world of bookkeeping and accounting is running smoothly for a day which is a good sign.
Or everyone is running up and down corridors waving their hands above their heads and screaming in anguish.
Aye more likely, I know I nearly did
I had sage payroll ring me up and try to crowbar £600 notes out of my bosses pocket, after making sure I'm definately getting the end of year disk, I mentioned that I can get the same functions for payroll including support for £60, they mumbled something and said they would call me back in a week, I felt strangely triumphant.
........ Someone shall hopefully come along and explain why, but i'm sure you can look this up on HMRCs website.
Neil
Just my view on this one but generally the discounted VAT is offered on B2B transactions, and claimed back anyway. It is the end user that usually picks up the tab for the VAT man, who gets his pound of flesh then.
That notwithstanding, obviously there are businesses that are not VAT registered, who will claim the discount too but I would guess that it is an exception rather than the rule.
Been off line for a couple of days, and you are right, it has been quiet. It usually takes me ages to go through the backlog but It has only taken me about 30 minutes today
Bill
Edited to correct misskeying errors. Got a new PC with a more compact keyboard than I am used to. keep hitting the wrong key
-- Edited by Wella on Wednesday 29th of February 2012 08:46:26 AM
