AAT Level 2 Exam Questions with Correct Answers Latest Update 2025
What are some examples of things that are exempt from vat? - Answers Betting, burial, cremation,
education, health, land, post office postal service
What is the difference between zero rated and exempt? - Answers You can claim back all input vat on
zero rated, you cannot claim back any VAT on exempt
What are some example of things that are zero rated vat? - Answers Food (subsistence), books,
children's clothes, public transport (provided it is designed to carry 10 passengers or more)
What is some example of things that are charged at 5% vat? - Answers Domestic fuel, women's sanitary
products, children's car seats and contraceptives
What happens if output tax is more than input tax? - Answers The company pays the difference to
HMRC
What is input tax? - Answers When VAT paid on all purchases
What is output tax? - Answers When VAT is charged on sales
Who's responsibility is it to ensure VAT is calculated correctly? - Answers The suppliers
Why may a company who has a turnover of less than £85,000 want to register for VAT? - Answers So
they can claim back all the VAT they have paid on goods and services
What penalty will you face if you don't register for VAT and your turnover is over £85,000? - Answers A
penalty of 15% of the tax due
What is a bookkeeper? - Answers Someone who records all the financial transactions of a business
What is an Accountant? - Answers Deals with the presentation and interpretation of figures
What is an accounting technician? - Answers Performs duties of both the bookkeeper and accountant
What are books of prime entry? - Answers Books filled with transactions from prime documents
What is a day book? - Answers A book where day to day sales and purchases are recorded
What is a cashbook? - Answers A record of the movement of money in and out
What are the three types of businesses? - Answers Sole Trader, Partnership, Limited Company
What is a Sole Trader? - Answers a person who is the exclusive owner of a business, entitled to keep all
profits after tax has been paid but liable for all losses.
What is a partnership? - Answers a business owned by typically 2-20 people
, Why are partnership's formed? - Answers there are more expertise and money available to invest in the
company
What are the advantages of a partnership? - Answers someone to cover in times of illness or holidays
greater expertise can be available
What are the disadvantages of a partnership? - Answers Partners have joint liability for the debts of
business regardless of which partner incurred the debt
What are the two types of limited companies? - Answers Private limited company
Public limited company
What are the disadvantages of limited companies? - Answers Owners take reward in the form of
dividends (reduce tax paid of profits)
Only lose the money they invested as share capital
What are the disadvantages of limited companies? - Answers high accounting standards
accounts are submitted to companies house (not private)
Bar private sector businesses, what other type of businesses are there? - Answers Public sector
businesses
Who runs and owns public sector businesses? - Answers The government
What are some examples of businesses owned by the government? - Answers Health trusts
Educational bodies (schools)
Local governments
What sort of accounting may a sole trader have? - Answers They will probably do most of the
bookkeeping theirselves, each year books will be taken to an accountant to see how well the business is
going
What sort of accounting may a partnership have? - Answers They will probably need to employ at least
one bookkeeper to record day to day transactions
What sort of accounting will a limited company have? - Answers They will require more detailed
accounting - not just records of what is brought and sold
What is the most common structure for large businesses? - Answers Hierarchical structure
How does responsibility work in the hierarchical structure? - Answers It passes from the director, to
senior management, to middle management, and then to supervisors
What are some examples of things that are exempt from vat? - Answers Betting, burial, cremation,
education, health, land, post office postal service
What is the difference between zero rated and exempt? - Answers You can claim back all input vat on
zero rated, you cannot claim back any VAT on exempt
What are some example of things that are zero rated vat? - Answers Food (subsistence), books,
children's clothes, public transport (provided it is designed to carry 10 passengers or more)
What is some example of things that are charged at 5% vat? - Answers Domestic fuel, women's sanitary
products, children's car seats and contraceptives
What happens if output tax is more than input tax? - Answers The company pays the difference to
HMRC
What is input tax? - Answers When VAT paid on all purchases
What is output tax? - Answers When VAT is charged on sales
Who's responsibility is it to ensure VAT is calculated correctly? - Answers The suppliers
Why may a company who has a turnover of less than £85,000 want to register for VAT? - Answers So
they can claim back all the VAT they have paid on goods and services
What penalty will you face if you don't register for VAT and your turnover is over £85,000? - Answers A
penalty of 15% of the tax due
What is a bookkeeper? - Answers Someone who records all the financial transactions of a business
What is an Accountant? - Answers Deals with the presentation and interpretation of figures
What is an accounting technician? - Answers Performs duties of both the bookkeeper and accountant
What are books of prime entry? - Answers Books filled with transactions from prime documents
What is a day book? - Answers A book where day to day sales and purchases are recorded
What is a cashbook? - Answers A record of the movement of money in and out
What are the three types of businesses? - Answers Sole Trader, Partnership, Limited Company
What is a Sole Trader? - Answers a person who is the exclusive owner of a business, entitled to keep all
profits after tax has been paid but liable for all losses.
What is a partnership? - Answers a business owned by typically 2-20 people
, Why are partnership's formed? - Answers there are more expertise and money available to invest in the
company
What are the advantages of a partnership? - Answers someone to cover in times of illness or holidays
greater expertise can be available
What are the disadvantages of a partnership? - Answers Partners have joint liability for the debts of
business regardless of which partner incurred the debt
What are the two types of limited companies? - Answers Private limited company
Public limited company
What are the disadvantages of limited companies? - Answers Owners take reward in the form of
dividends (reduce tax paid of profits)
Only lose the money they invested as share capital
What are the disadvantages of limited companies? - Answers high accounting standards
accounts are submitted to companies house (not private)
Bar private sector businesses, what other type of businesses are there? - Answers Public sector
businesses
Who runs and owns public sector businesses? - Answers The government
What are some examples of businesses owned by the government? - Answers Health trusts
Educational bodies (schools)
Local governments
What sort of accounting may a sole trader have? - Answers They will probably do most of the
bookkeeping theirselves, each year books will be taken to an accountant to see how well the business is
going
What sort of accounting may a partnership have? - Answers They will probably need to employ at least
one bookkeeper to record day to day transactions
What sort of accounting will a limited company have? - Answers They will require more detailed
accounting - not just records of what is brought and sold
What is the most common structure for large businesses? - Answers Hierarchical structure
How does responsibility work in the hierarchical structure? - Answers It passes from the director, to
senior management, to middle management, and then to supervisors
