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Inventory and VAT

inventory and tax

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Francis Rammalo
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17 views11 pages

Inventory and VAT

inventory and tax

Uploaded by

Francis Rammalo
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 11

INVENTORY AND VAT

AUGUST
Inventory
Inventory and VAT is found in pages 107 - 124 of
Chapter 6: Inventory and VAT

Important inventory definitions (page 108):


Inventory: (goods/stock/material/ held for resale)
Cost price: (inventory purchase price + transport costs+
other costs in page 108)
Selling price: (cost price + mark up%) refer page 108
Gross profit (sales – cost )
Mark-up %: (selling price – cost price)/cost *100 refer
page 108
Methods of recording
Inventory
Two Methods: Perpetual and Periodic inventory
systems
Perpetual: (Continual) / (Always Periodic: (Seasonal) /
updating in real time) (Infrequent)

Inventory records are continuously No continuous records


updated

Cost of sales determined and Cost of sales determined at the end


recorded at each sale of the financial period (formula)

Purchases and inventory movements Purchases are recorded in the


are recorded in the inventory general purchases account. Inventory ledger
ledger account account is updated at year end stock
count.

Inventory deficit can be measured No measurement or control of


and recorded inventory deficits.

Gross profit is higher (inventory Gross profit is lower (inventory


deficits are expensed) deficits forms part of COF)
Examples

Differences between:
Please refer example 6.1 (Perpetual
inventory)
&
Please refer example 6.2 (Periodic inventory)
Value Added Tax (VAT)
Important VAT Definitions pages 113 -
114:

VAT vendor
Marked price (refer page 108 for differences in
marked price with vat and without vat)
VAT input
VAT output
 Levied at 15%
 Zero rated goods and services
 Exempt goods and services
 Practice examples (6.3, 6.4, 6.5)
NET PROFIT/LOSS
STATEMENT OF FINANCIAL PERFORMANCE

SALES (Output) XXX


COST OF SALES (XX)
GROSS PROFIT XXX
EXPENSES (Input) (XX)
NET PROFIT Profit/(Loss) XXX

*Please note that purchases (input vat) and sales (output vat) of capital nature used by a
VAT vendor in their enterprise also attracts vat these are items that are reflected and
presented in the statement of financial position (formerly known as the Balance Sheet).
VAT CALCULATION

VAT OUTPUT (Income/Sales)

VAT INPUT (Expenses/Purchases)

=
VAT payable/refundable
VAT EXAMPLE
Example 6.5

Required: Record VAT in the general


ledger using perpetual method.

Please not that for ease, I prepared journal entries for ease of
recording in the general ledger. Please note that this
question did not ask for journal entries only asked for
the general ledger remember to read the required and only
answer what is required.

Refer below for journals then go to page 116-117 to see the


solution to what was required.
VAT EXAMPLE
Example 6.5 continued
1) Debit: Inventory (CP) R50 000
Debit: Vat input (CP * 15% OR Creditors – Invent) R 7500
Credit: Creditors (CP + VAT) R57.500

2) Debit: Debtor (Sales + vat) R71 875


Credit: Vat output (SP (62.5) *15% or Debtors – Sales) R9
375
Credit: Sales ( CP + mark up%) (R50 * 1.25) R62 500

3) Debit: Cost of sales (CP * units sold) R50 000


Credit: Inventory R50 000
VAT EXAMPLE
Example 6.5 continued…notes

1) Where there is a purchase journal 1 above is always


there, however had the purchase been paid in cash not
credit the credit in journal 1 above would have been
bank. ( See example 6.1 page 110 journal 1 the credit is
“bank” not creditor) .
2) Where there is a sale of goods journal 2 & 3 above are
always there.
3) Practise example 6.5 again at home after class to
understand the notes above.
4) Refer page 116 -117 on how to do the general
ledger.
9/3/0XX 11

THANK YOU

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