Mirchawala’s Hub of Accountancy:

FA1:Recording Financial Transactions:

Value Added Tax (VAT):
Question#1:
Esther received $4,418 from a customer to whom she had sold goods on credit for $3,760 plus sales tax
of $658
What is the double entry for this receipt in the account of Esther?
A. Dr Sales $3,760 Cr Cash $3760
B. Dr Cash $4,418 Cr Account receivables $4,418
C. Dr Cash $3,760 Cr Sales $3,760
D. Dr Accounts receivables $4,418 Cr Cash $4,418
Question#2:
Rodger is registered for sales tax which is charged at 17.5%. A customer is invoiced for goods with
a list price of $240,000.  The customer is given a trade discounts of 25%
How much sales tax should be included on the invoice?
A. $26,809
B. $31,500
C. $35,745
D. $42,000
Question#3:
A business which is registered for sales tax, has the following totals for the purchases day book for a
week:
$
Purchases (gross) 350,150
Purchases (net) 298,000
Sales tax 52,150
How should this information be recorded in the double entry system?
A. Dr Purchases $298,000 Cr Accounts payables control $298,000
B. Dr Purchases $298,000 Dr Sales tax $52,150 Cr Accounts payables control $350,150
C. Dr Purchases $350,150 Cr Accounts payable control $298,000 Cr Tax $52,150
D. Dr Purchases $350,150 Cr Account payables control $350,150
Question#4:
One of the Jean’s customers purchased goods on credit for $1,880 plus sales tax of $329, and paid Jean
$2,209 for those goods.
What is the double entry to record this payment?
A. Dr Cash $2,209 Cr Trade receivables $1,880 Cr Sales tax $329
B. Dr Cash $2,209 Cr Sales $1,880 Cr Sales tax $329
C. Dr Cash $2,209 Cr Sales $2,209
D. Dr Cash $2,209 Cr Trade receivables $2,209
Question#5:
The sales day book totals for a trader who is registered for sales tax were as follows:
$
Sales (net) 151,000
Sales tax 26,425
Sales (gross) 177,425
How should these be posted in the double entry system?
A. Dr Trade receivables control $177,425 Cr Sales tax $26,425 Cr Sales $151,000
B. Dr Trade receivables control $151,000 Cr Sales 151,000

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C. Dr Trade receivables control $177,425 Cr Sales $177,425

D. Dr Trade receivables control $151,000 Dr Sales tax $26,425. Cr Sales $177,425
Question#6:
According to her sales return day book Amy’s returns were $880 excluding sales tax at 17.5%. Amy is
registered for sales tax.
How should this information be recorded In Amy’s general ledger?
A. Dr Receivables control $1,034 Cr Returns inwards $1,034
B. Dr Returns inwards $880 Cr Receivables control $880
C. Dr Returns inwards $880 Dr Sales tax $154 Cr Receivables control $1,034
D. Dr Receivables control $1,034 Cr Returns inwards $880Cr Sales Tax $154
Question#7:
The following has been extracted from Gordon’s purchase returns day book:
Purchase returns Sales tax Total
$15,260 $3,052 $18,312
How should this be recorded in Gordon’s ledgers?
A. Dr Purchase returns $18,312 Cr Sales tax $3,052 Cr Payables $15,260
B. Dr Payables $18,312 Cr Purchase returns $18,312
C. Dr Purchase returns $15,260 Dr Sales tax $3,052 Cr Payables $18,312
D. Dr Payables $18,312 Cr Sales tax $3,052 Cr Purchase returns $15,260
Question#8:
During the period, Alisa has paid input sales tax of $450 on her purchases and charged output sales tax
of $300 on her sales
Alias is now completing her sales tax return.
What is the total amount of sales tax due to or from the tax authorities?
A. $150 due to tax authorities
B. $750 due to tax authorities
C. $750 due from the tax authorities
D. $150 due from the tax authorities
Question#9:
Sanjay is a sales tax registered trader. He has recently received an invoice for goods for resale which
costs $360 including sales tax. The rate of sales tax is 20%
At what amount should Sanjay record the purchase in his purchases account?
$
Question#10:
Anwar makes sales in the quarter of $34,800 including sales tax at 20%. His total purchases net of sales
tax are $8,510.
How much should he pay to the government?
A. $5,800.00
B. $5,258.00
C. $4,098.00
D. $1,702.00
Question#11:
Janice buys a dress costing $130, shoes costing $70 and a jacket costing $190. These are all gross figures,
inclusive of sales tax at 20%.
How much sales tax in total has Janice paid?
A. $65.00

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B. $68.00
C. $75.00
D. $78.00
Question#12:
Sarah runs her own business and is registered for sales tax. This week her purchases were $2,400
inclusive of sales tax and her sales were $1,000 exclusive of sales tax. The rate of sales tax is 20%.
At the end of the week what will the sales tax account in her ledger show?
A. $240 receivable
B. $240 payable
C. $200 receivable
D. $200 payable
Question#13:
Idris is a sales tax registered trader. On 1 October he purchases carpets for his new showroom at the list
price of $2,000. He is given a trade discount of 10% and the sales tax rate is 20%.
What sum will Idris be invoiced, inclusive of sales tax?
A. $2,400
B. $2,640
C. $1,760
D. $2,160
Question#14:
Peter makes sales in the quarter of $50,226 including sales tax at 20%. His total purchases net of sales
tax are $23,980.
How much should he pay to the tax authorities?
A. $6,048.53
B. $5,249.20
C. $4,374.33
D. $3,575.00
Question#15:
Walter sells goods to Ninevah with a list price (exclusive of sales tax) of $4,300, offering a 4% trade
discount. Sales tax is 20%
What amount should be recorded for this transaction in the sales account (to the nearest $1)?
A. $4,850
B. $4,128
C. $5,053
D. $3,513
Question#16:
Which of the following statements regarding sales tax in the trial balance is true?
A. Output tax and input tax are debit balances
B. Output tax and input tax are credit balances
C. Output tax is a credit balance and input tax is a debit balance
D. Output tax is a debit balance and input tax is a credit balance
Question#17:
Melanie is a sales tax registered trader. Her purchases day book shows purchases of $2,000, net of sales
tax at 20%.
What double entry will Melanie post at the end of her day’s trading?
A. Dr Purchases $2,000 Cr Payables $2,000
B. Dr Purchases $2,400 Cr Payables $2,400
C. Dr Payables $2,400 Cr Purchases $2,000 Cr Sales tax $400

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D. Dr Purchases $2,000 Dr Sales tax $400 Cr Payables $2,400

Question#18:
Who normally suffers the burden of sales tax?
A. The first supplier in the chain of supply
B. The manufacturer
C. The retailer
D. The consumer
Question#19:
Which of the following statements best explains what output tax is?
A. It is a sales tax on purchases
B. It is a sales tax on sales
C. It is a payment to the tax authorities
D. It is a repayment from the tax authorities
Question#20:
On 1 September 20X9 the opening balance on Gordon's sales tax account is $5,250 credit. During the
month he makes sales net of sales tax of $62,150 and purchases inclusive of sales tax of $71,940.
The rate of sales tax is 10%.
What is the balance on Gordon's sales tax account at 30 September 20X9?
A. $3,706 Cr
B. $4,271 Cr
C. $4,925 Cr
D. $5,575 Dr

From the desk of Sir Mustafa Ahmed Mirchawala: Page 4