2020 Accounting 100 Question bank 3 (2016 Accounting 100 Assessment Opportunity-Updated) Question 1
QUESTION 1 (15 MARKS)
Fashionista Entity is a registered VAT vendor. The entity has been operating in the clothing
retail industry since 1 August 2014. VAT is calculated at 15% in accordance with the VAT
Act. The reporting date of Fashionista Entity is 31 July.
A review of Fashionista Entity’s trial balance on 31 July 2020 revealed that the VAT payment
control account had a debit balance of R280 000. The accountant of Fashionista was unsure
how the VAT payment control account could have a debit balance as it always had a credit
balance in previous months.
The accountant furthermore learnt that a VAT input claim is denied by SARS on certain
transactions even though the entity pays VAT thereon. The accountant is confused about
this situation because he was under the impression that VAT could always be claimed as an
input, provided a VAT invoice existed.
Required
a) Explain which accounts are closed off to the VAT payment control account and why the
VAT payment control account would have a debit balance. (3)
b) With reference to the definition of the relevant element in the conceptual framework,
explain how the VAT payment control account (debit balance) will be classified and
where it will be presented on the Statement of Financial position on 31 July 2020. (9)
c) List 3 items on which the claim of VAT input is denied even though VAT is charged by
the supplier. (3)
2
QUESTION 1 (15 MARKS)
Fashionista Entity is a registered VAT vendor. The entity has been operating in the clothing
retail industry since 1 August 2014. VAT is calculated at 15% in accordance with the VAT
Act. The reporting date of Fashionista Entity is 31 July.
A review of Fashionista Entity’s trial balance on 31 July 2020 revealed that the VAT payment
control account had a debit balance of R280 000. The accountant of Fashionista was unsure
how the VAT payment control account could have a debit balance as it always had a credit
balance in previous months.
The accountant furthermore learnt that a VAT input claim is denied by SARS on certain
transactions even though the entity pays VAT thereon. The accountant is confused about
this situation because he was under the impression that VAT could always be claimed as an
input, provided a VAT invoice existed.
Required
a) Explain which accounts are closed off to the VAT payment control account and why the
VAT payment control account would have a debit balance. (3)
b) With reference to the definition of the relevant element in the conceptual framework,
explain how the VAT payment control account (debit balance) will be classified and
where it will be presented on the Statement of Financial position on 31 July 2020. (9)
c) List 3 items on which the claim of VAT input is denied even though VAT is charged by
the supplier. (3)
2
