Photo AI
VALUE-ADDED TAX (VAT) Chuckle Traders is registered for VAT, although the annual turnover is less than R1 000 000 - NSC Accounting - Question 1 - 2022 - Paper 2
Question 1
VALUE-ADDED TAX (VAT) Chuckle Traders is registered for VAT, although the annual turnover is less than R1 000 000. The standard VAT rate is 15%. The business is own... show full transcript
Worked Solution & Example Answer:VALUE-ADDED TAX (VAT) Chuckle Traders is registered for VAT, although the annual turnover is less than R1 000 000 - NSC Accounting - Question 1 - 2022 - Paper 2
Step 1
Step 2
Calculate the amount of VAT that is payable to SARS for the two-month period ended 30 April 2022.
Answer
To calculate the VAT payable to SARS, this can be derived using the VAT-related transactions provided:
-
VAT on sales (including VAT):
- Cash and credit sales: R87 400
- Excluding VAT: rac{R87,400}{1.15} = R76,348.70
- VAT on sales:
-
VAT on purchases (excluding VAT):
- Purchases: R59 000
- VAT on purchases:
-
Total VAT collected:
- VAT on sales: R11,051.30
-
Total VAT paid on purchases:
- R8,850
-
VAT Payable to SARS:
The total amount of VAT payable to SARS for the two-month period is R2,201.30.
Step 3
Chuckles uses the money collected for VAT to pay business expenses. He does not have sufficient cash to make the VAT payments on the due dates. What would you say to Chuckles? State TWO different/separate points.
Answer
-
It is crucial for Chuckles to understand that using VAT collected for business expenses is illegal and could lead to severe penalties from SARS, including legal action.
-
Chuckles should implement a proper budgeting system to manage his cash flow effectively, ensuring that he sets aside the VAT payments to avoid falling into this mismanagement habit.