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1. Sales tax is:
A) A direct tax levied on sales of goods and services
B) An indirect tax levied on the sales of goods and services
C) Administered by the Treasury
D) Charged by businesses on taxable supplies

2. Sales tax is due on all sales. Is this statement correct?
A) Yes
B) No

3 .When sales tax is not recoverable on the cost of a motor car, it should be treated in which of
the following
ways?
A)Deducted from the cost of the asset capitalised
B) Included in the cost of the asset capitalised
C) Deducted from output tax for the period
D) Written off to I/S as an expense

4. Purchases of goods costing $500 subject to sales tax at 15% occur. Which of the following
correctly records the credit purchase?
A) Debit Purchases $500.00
Debit Sales tax $75.00
Credit Payables $575.00

B) Debit Purchases $575.00
Credit Payables $575.00

C) Debit Purchases $436.78
Debit Sales tax $65.22
Credit Payables $500.00

D) Debit Purchases $500.00
Credit Sales tax $65.22
Credit Payables $434.78

5. When a cash purchase of $115.00 is made (including sales tax at 15%) the entries are:
A) Debit Purchases 115.00
Credit Cash 115.00

B) Debit Purchases 100.00
Debit Sales tax 15.00
Credit Cash 115.00

C) Debit Cash 100.00
Debit Sales tax 15.00
Credit Purchases 115.00
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D) Debit Cash 115.00
Credit Purchases 115.00

6. Mountains sells goods on credit to Hill. Hill receives a 10% discount from Mountain and a
further 5% settlement discount if goods are paid for within 14 days. Hill bought goods with a list
price of $200,000 from Mountain. Sales tax is at 17.5%
What amount should be included in Mountains receivables ledger for this transaction?
A) $235,000
B) $211,500
C) $200,925
D) $209,925

7. Scott ltd is preparing an invoice for a machine. Its list price is $12,000+ sales tax at 17.5%. A
discount of 2% is offered, but only if payment is made with in 30 days. How much sales tax
should be shown on the invoice?
A) $2,100
B) $2,058
C) $1,787
D) $1,751

8. A business has an opening balance on the VAT account showing an amount owing to HM
Revenue & Customs of $3,210. During the period there were standard rated outputs of $12,400,
excluding VAT, and standard rated inputs of $11,280, including VAT. During the period $2,890
was paid to HM Revenue & Customs. The standard rate of VAT is 17.5%
What is the balance on the VAT account at the end of the period?
A) $170
B) $810
C) $2,720
D) $3,700

9. During the 3 month period, a business made sales of $69,200 plus VAT at 17.5%. The balance
on the debtors account at the start of the period was $5,329 and at the end of the period $4,771.
How much cash was received from debtors during the period?

A) $68,642
B) $69,758
C) $80,752
D) $81,868

10. A trader who is not registered for sales tax purposes buys goods on credit. These goods have
a list price of $2,000 and the trades is given the trade discount of 20%. The goods carry sales tax
at 17.5%
The correct ledger entries to record this purchase are to debit the Purchases account and to credit
the Suppliers account with :

A) $1,600
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B) $1,880
C) $2,000
D) $2,350

11. If sales (including VAT) amounted to $27,612.50, and purchases (excluding VAT) amounted
$18,000, the balance on the VAT account assuming all items are subject to VAT at 17.5% would
be:

A) $962.50 debit
B) $962.50 credit
C) $1,682.10 debit
D) $1,682.10 credit

12. A business offers interset ordering and payment facilities. A customer purchases goods for
$200 plus sales tax at 17.5% by credit card. How would this transaction be posted to the accounts
of the buyer?

A) Dr bank $200; Dr Sales tax $35; Cr Purchases $235
B) Dr Purchases $200; Dr sales tax $35; Cr account payable $235
C) Dr Purchases $200; Dr sales tax $35; Cr credit card account $235
D) Dr account payable $235; Cr credit card account $235

13. Who normally suffers the cost of sales tax ?
A) The first supplier in the chain of supply
B) The manufacturer
C) The retailer
D) The consumer

14. Output tax is ?

A) VAT on purchases
B) VAT on sales
C) Payments to HM Revenue & Customs
D) Repayments to HM Revenue and customs

15. Salman gives his customers individual trade discounts from the list price and a general 5%
cash discount for all invoices settled with in 7 days of issue. A new customer, Ali negotiates a
25% trade discount. His transactions during June are:
June12 Buys goods with a $5,000 list price
June 15 Returns goods with a $1,000 list price as faulty
June 16 Pays half of the net balance on his account
How much does Ali owe to Salman at the end of June?
A) $1,425
B) $1,500
C) $2,000
D) $2,850
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16. During a month a business made sales of 24,600 and purchases of 15,200 exclusive of VAT. The
business is registered for VAT and both sales and purchases are subject to VAT at 17.5%. What is
the balance on the VAT account at the end of the month?
A) A debit balance of 1,645
B) A credit balance of 1,645
C) A debit balance of 11,045
D) A credit balance of 11,045
17. If an invoice states that the settlement terms are net 30 days, this indicates that:
A) The invoice amount, net of VAT, is payable 30 days from receipt of the goods
B) The invoice amount, net of VAT, is payable 30 days from the invoice date
C) The invoice amount, gross of VAT, is payable 30 days from receipt of the goods
D) The invoice amount, gross of VAT, is payable 30 days from the invoice date
18. Avalon gives his customers individual trade discounts from the list price and a general 5%
cash discount for all invoices settled with in 7 days of issue. A new customer, Nolava
negotiates a 25% trade discount. His transaction during June are:
June 12 Buys goods with a 5,000 list price
June 15 Return goods with a 1,000 list price as faulty
June 16 Pays half of the net balance on his account
How much does Nolava owe Avalon at the end of June?
A) 1,425
B) 1,500
C) 2,000
D) 2,850
19. A summary of the transactions of Ramsgate, who is registered for VAT at 17.5%,shows the
following for the month of August 20X9.
Outputs 60,000 (exclusive of VAT)
Inputs 40,286 (inclusive of VAT)
At the beginning of the period Ramsgate owed 3,400 to HM revenue and customs, and during
the period he has paid 2,600 to them.
At the end of the period the amount owing to HM revenue and customs is :
A) 3,700
B) 3,930
C) 4,400
D) 5,300
20. The sales account is:
A) Credit with the total of sales made, including VAT
B) Credit with the total of sales made, excluding VAT
C) Debit with the total of sales made, including VAT
D) Debit with the total of sales made, excluding VAT
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21. A business sold goods that had a net value of 600 to Lucid plc. What entries are required
to record this transaction if VAT is payable at 17.5%?
A) Dr Lucid plc 600, Dr VAT 105, Cr Sales 705
B) Dr Lucid plc 705, Cr VAT 105, Cr Sales 600
C) Dr Lucid plc 600, Cr VAT 105, Cr Sales 600
D) Dr Sales 600, Dr VAT 105, Cr Lucid plc 705
22. During the first quarter of 19X9, a business had taxable outputs, net of VAT, of $42,780 and taxable
inputs, net of VAT of $30,360. All are subject to VAT at standard rate. At the end of the quarter,
how much VAT is payable or recoverable from Customs and Exchange?
A) $2,174 payable
B) $2,174 recoverable
C) $1,850 payable
D) $1,850 recoverable
23. Reality Limited is a manufacturing company, buys material s costing $5,200, machinery costing
$5,200, machinery costing $3,416 and office equipment costing $1,340. It is also sells goods for
$5,200. These transactions are all inclusive of sales tax at 17.5%.
What is the total input sales tax, which the business has paid?
A) $967.84
B) $1,742.30
C) $708.34
D) $1,482.8
24. A company recieves a settlement discount of $35 from a supplier. The amount is debited to the
discount received account. As a result, gross profit is:
A) Understated by $35
B) Understated by $70
C) Overstated by $70
D) Uneffective

25. Fake Ltd offers its credit customers a settlement discount of 5% for payment with in 10 days of the
invoice date. It is prepairing an invoice for a credit customer who has just purchased goods for
$1,000 excluding sales tax. Sales tax is at 17.5%. what will be the amount shown on the invoice sent
to the customer?
A) $1,000
B) $1,116.25
C) $1,166.25
D) $1,175