7.1 ThembaLushaba Ltd
Assume a VAT rate of 15%.
ThembaLushaba was registered for VAT. He purchased for cash one dozen cans of Castille
lager for R11.10 per can (VAT inclusive). He then sold them for cash R22.20 per can (VAT
inclusive). After that he stopped trading as a business.
1. Process questions
YOU ARE REQUIRED TO:
Answer the following questions:
a) Show, using journal entries, how the above transactions will be recorded in the general
journal.
b) Post to the general ledger.
c) Prepare a trial balance.
d) Prepare a statement of comprehensive income.
e) Prepare a statement of financial position.
f) Prepare and calculate Themba’s VAT return that he would submit to SARS.
2. Application questions
YOU ARE REQUIRED TO:
Answer the following questions:
a) Why are the figures in the statement of comprehensive income exclusive of VAT?
b) Show Themba’s VAT return if he had exported the beer.
c) Who collects VAT?
d) Who receives the VAT?
e) Who actually ends up paying the VAT?
f) Themba left the beer in the hot sun and it began to taste bitter. He ended up selling it for
R5.04 per can (VAT inclusive). Calculate his VAT return.
g) Why is this tax called Value Added Tax? (Hint: The previous questions should help you.)
3. YOU ARE REQUIRED TO:
Give your viewpoints on the following three comments:
a) If Themba’s beer went sour and he had to throw it away, he would actually get a refund
of R1 per can from SARS.
b) Input tax is a current asset.
c) VAT payable is a deductible expense for a VAT registered business.
, ThembaLushaba Ltd Solution
Process questions
a)
Purchases 9.65
Input VAT 1.45
Bank 11.10
Bank 22.20
Sales 19.30
Output VAT 2.90
b)
Purchases
Bank 9.65
Sales
Bank 19.30
Bank
Sales + VAT 22.20 Purchases + VAT 11.10
Balance c/d 11.10
22.20 22.20
Balance b/d 11.10
(Input) VAT (Output)
Bank (Purchases) 1.45 Bank (Sales) 2.90
Balance b/d 1.45 −
2.90 2.90
Balance c/d 1.45
Assume a VAT rate of 15%.
ThembaLushaba was registered for VAT. He purchased for cash one dozen cans of Castille
lager for R11.10 per can (VAT inclusive). He then sold them for cash R22.20 per can (VAT
inclusive). After that he stopped trading as a business.
1. Process questions
YOU ARE REQUIRED TO:
Answer the following questions:
a) Show, using journal entries, how the above transactions will be recorded in the general
journal.
b) Post to the general ledger.
c) Prepare a trial balance.
d) Prepare a statement of comprehensive income.
e) Prepare a statement of financial position.
f) Prepare and calculate Themba’s VAT return that he would submit to SARS.
2. Application questions
YOU ARE REQUIRED TO:
Answer the following questions:
a) Why are the figures in the statement of comprehensive income exclusive of VAT?
b) Show Themba’s VAT return if he had exported the beer.
c) Who collects VAT?
d) Who receives the VAT?
e) Who actually ends up paying the VAT?
f) Themba left the beer in the hot sun and it began to taste bitter. He ended up selling it for
R5.04 per can (VAT inclusive). Calculate his VAT return.
g) Why is this tax called Value Added Tax? (Hint: The previous questions should help you.)
3. YOU ARE REQUIRED TO:
Give your viewpoints on the following three comments:
a) If Themba’s beer went sour and he had to throw it away, he would actually get a refund
of R1 per can from SARS.
b) Input tax is a current asset.
c) VAT payable is a deductible expense for a VAT registered business.
, ThembaLushaba Ltd Solution
Process questions
a)
Purchases 9.65
Input VAT 1.45
Bank 11.10
Bank 22.20
Sales 19.30
Output VAT 2.90
b)
Purchases
Bank 9.65
Sales
Bank 19.30
Bank
Sales + VAT 22.20 Purchases + VAT 11.10
Balance c/d 11.10
22.20 22.20
Balance b/d 11.10
(Input) VAT (Output)
Bank (Purchases) 1.45 Bank (Sales) 2.90
Balance b/d 1.45 −
2.90 2.90
Balance c/d 1.45
