Matric Accounting IEB Notes
VAT - MODULE 12
Value Added Tax charged on the supply of goods or services by a vendor
- Vendors registered for VAT obliged to collect from customers/clients on behalf of
SARS & can claim any VAT on supplies or expenses to generate income
15% - minister of finance can change it at anytime (changed to 15% in April 2018)
WHAT IS MEANT BY VAT CAN BE CLAIMED
If someone buys stock for their business and is charged VAT because she is not the final
user, she is exempt from paying VAT. However, the company she bought it from cannot
decipher this fact for all their customers therefore SARS requires registered vendors to
charge VAT on their selling prices then present a VAT invoice to SARS which will refund
them the money. One claim is made over two months.
- There would be profit from the VAT cost price to the selling price, therefore the
vendor should only pay for their selling price VAT and claim back their cost price VAT.
- SARS receives the full amount from the supplier and the person who bought stock.
STANDARD RATE OF VAT
With the exception of some items, all are subjected to standard VAT
Zero-Rated Items:
Aim is to prevent hardship to poor customers (list can be altered by minister of finance)
- Brown bread
- Milk
- Maize
- Rice
- Lentils
- Dried beans
- Legumes
- Fruit
- Vegetables
- Milk (powders)
- Cooking oil
- Eggs
- Canned pilchards
- Paraffin
VAT EXEMPTED ITEMS
Not the same as zero-rated as minister of finance cannot change this: part of the VAT Act
- Interest
- Rates
- Export services
- Childcare services
- Educational services
- Services provided by associations not for gain (NPO)
, - Salaries & wages
- Petrol
WHO MUST REGISTER
Any business with a turnover of more than 1 million a year
- Those with less than 1 mil can voluntarily register if they feel the need
- If turnover is less than R20000 they cannot register
METHODS OF CALCULATING HOW VAT IS PAID AND CLAIMED
Invoice Basis
Normal method in SA and applied unless writing and permission is granted for the contrary
- VAT charged when transaction happens and becomes due to SARS at the end of the
2 month tax period for that business
- Including VAT for goods sold on credit of which money has not yet been received
(cash flow implications)
Receipt Basis
To assist small businesses with cash flow problems - must apply for this
Business only responsible for payment of VAT when debtors have paid their account
TAX PERIODS
2 month tax period is the standard (every second month)
Certain cases can apply for different period
To spread workload half of the businesses start in Jan & the other half in Feb
Return submitted on 25th day after the end of the month covered by the tax period
(25th March will be for Jan & Feb)
VAT forms either delivered to SARS or e-filing system used via internet with EFTs
- E-filing more popular, vendor allocated password. Form filled and submitted
immediately with EFT
VAT EXCLUSIVE AND INCLUSIVE
In SA all goods are sold VAT inclusive
In business world more common to see exclusive rate
Formulas:
- Exclusive x 15/100 (15%) = VAT
- Inclusive x 15/115 = VAT
DETAILED VAT CALCULATIONS
Vendor will have a record of all the VAT charged on goods sold
VAT charged on bought items must be deducted as it has already been paid to SARS by
supplier & the difference is what is paid to SARS
Possible for input to exceed output therefore SARS will have to refund
VAT OUTPUT (sales) - VAT INPUT (purchases) = AMOUNT OWED BY/TO SARS
- If input is bigger SARS owes, if output is bigger vendor owes
VAT not claimed on:
Subtract from output
- Debtors allowances (returns)
- Discount allowed and discount cancelled on r/d cheques
, - Bad debts
Subtract from input
- Creditors allowances (returns)
- Discount received
- Drawings
- Donations
VAT CONTROL ACCOUNT
- Debit: Decrease in VAT due to SARS (input)
- Credit: Increase in VAT due to SARS (output)
- Debit balance: Refund from SARS
- Credit balance: Owing to SARS
VAT INPUT/OUTPUT ACCOUNT
- Record full amount in bank/creditors control/debtors control
- Record exclusive amount in trading stock/sales
- Record VAT amount in input/output
SUBMITTING A RETURN
On or before the 25th of the month after tax period
Shows amount owed to/by SARS
Vendor who fails to render a return on time charged 10% of outstanding VAR + interest at
the prevailing rate for each month or part thereof
Records
Records must be kept for 5 years from date of submission of return in case of inspection
FIXED/TANGIBLE ASSETS - MODULE 7
Acquired for use in the day-to-day business operations & not intended for resale
Investing operation to assist in profit making (machinery or vehicles for eg)
AGE, REPLACEMENT VALUE AND LIFE SPAN OF ASSETS
Determining when it is appropriate to sell or get rid of old assets. Take the following into
account:
- The asset being considered, different assets have different lifespans.
- Land & buildings have longer lifespans (sometimes increase in value over
time)
- Technology like computers is continually increasing therefore may have to be
replaced fairly quickly to keep up
- The use of the asset
- Vehicle driven over short vs long distances not subject to the same wear and
tear
- Maintenance policy of company and how effective they are with routine services
- Assets with balloon payment (residual) generally trade in assets quicker
- Balloon payment: buy an asset on credit but only borrows amount equal to its
expected trade-in after period of time
- FA manager needs to consider in respect of fixed assets the over-capitalisation
VAT - MODULE 12
Value Added Tax charged on the supply of goods or services by a vendor
- Vendors registered for VAT obliged to collect from customers/clients on behalf of
SARS & can claim any VAT on supplies or expenses to generate income
15% - minister of finance can change it at anytime (changed to 15% in April 2018)
WHAT IS MEANT BY VAT CAN BE CLAIMED
If someone buys stock for their business and is charged VAT because she is not the final
user, she is exempt from paying VAT. However, the company she bought it from cannot
decipher this fact for all their customers therefore SARS requires registered vendors to
charge VAT on their selling prices then present a VAT invoice to SARS which will refund
them the money. One claim is made over two months.
- There would be profit from the VAT cost price to the selling price, therefore the
vendor should only pay for their selling price VAT and claim back their cost price VAT.
- SARS receives the full amount from the supplier and the person who bought stock.
STANDARD RATE OF VAT
With the exception of some items, all are subjected to standard VAT
Zero-Rated Items:
Aim is to prevent hardship to poor customers (list can be altered by minister of finance)
- Brown bread
- Milk
- Maize
- Rice
- Lentils
- Dried beans
- Legumes
- Fruit
- Vegetables
- Milk (powders)
- Cooking oil
- Eggs
- Canned pilchards
- Paraffin
VAT EXEMPTED ITEMS
Not the same as zero-rated as minister of finance cannot change this: part of the VAT Act
- Interest
- Rates
- Export services
- Childcare services
- Educational services
- Services provided by associations not for gain (NPO)
, - Salaries & wages
- Petrol
WHO MUST REGISTER
Any business with a turnover of more than 1 million a year
- Those with less than 1 mil can voluntarily register if they feel the need
- If turnover is less than R20000 they cannot register
METHODS OF CALCULATING HOW VAT IS PAID AND CLAIMED
Invoice Basis
Normal method in SA and applied unless writing and permission is granted for the contrary
- VAT charged when transaction happens and becomes due to SARS at the end of the
2 month tax period for that business
- Including VAT for goods sold on credit of which money has not yet been received
(cash flow implications)
Receipt Basis
To assist small businesses with cash flow problems - must apply for this
Business only responsible for payment of VAT when debtors have paid their account
TAX PERIODS
2 month tax period is the standard (every second month)
Certain cases can apply for different period
To spread workload half of the businesses start in Jan & the other half in Feb
Return submitted on 25th day after the end of the month covered by the tax period
(25th March will be for Jan & Feb)
VAT forms either delivered to SARS or e-filing system used via internet with EFTs
- E-filing more popular, vendor allocated password. Form filled and submitted
immediately with EFT
VAT EXCLUSIVE AND INCLUSIVE
In SA all goods are sold VAT inclusive
In business world more common to see exclusive rate
Formulas:
- Exclusive x 15/100 (15%) = VAT
- Inclusive x 15/115 = VAT
DETAILED VAT CALCULATIONS
Vendor will have a record of all the VAT charged on goods sold
VAT charged on bought items must be deducted as it has already been paid to SARS by
supplier & the difference is what is paid to SARS
Possible for input to exceed output therefore SARS will have to refund
VAT OUTPUT (sales) - VAT INPUT (purchases) = AMOUNT OWED BY/TO SARS
- If input is bigger SARS owes, if output is bigger vendor owes
VAT not claimed on:
Subtract from output
- Debtors allowances (returns)
- Discount allowed and discount cancelled on r/d cheques
, - Bad debts
Subtract from input
- Creditors allowances (returns)
- Discount received
- Drawings
- Donations
VAT CONTROL ACCOUNT
- Debit: Decrease in VAT due to SARS (input)
- Credit: Increase in VAT due to SARS (output)
- Debit balance: Refund from SARS
- Credit balance: Owing to SARS
VAT INPUT/OUTPUT ACCOUNT
- Record full amount in bank/creditors control/debtors control
- Record exclusive amount in trading stock/sales
- Record VAT amount in input/output
SUBMITTING A RETURN
On or before the 25th of the month after tax period
Shows amount owed to/by SARS
Vendor who fails to render a return on time charged 10% of outstanding VAR + interest at
the prevailing rate for each month or part thereof
Records
Records must be kept for 5 years from date of submission of return in case of inspection
FIXED/TANGIBLE ASSETS - MODULE 7
Acquired for use in the day-to-day business operations & not intended for resale
Investing operation to assist in profit making (machinery or vehicles for eg)
AGE, REPLACEMENT VALUE AND LIFE SPAN OF ASSETS
Determining when it is appropriate to sell or get rid of old assets. Take the following into
account:
- The asset being considered, different assets have different lifespans.
- Land & buildings have longer lifespans (sometimes increase in value over
time)
- Technology like computers is continually increasing therefore may have to be
replaced fairly quickly to keep up
- The use of the asset
- Vehicle driven over short vs long distances not subject to the same wear and
tear
- Maintenance policy of company and how effective they are with routine services
- Assets with balloon payment (residual) generally trade in assets quicker
- Balloon payment: buy an asset on credit but only borrows amount equal to its
expected trade-in after period of time
- FA manager needs to consider in respect of fixed assets the over-capitalisation
