2. 2 SAPPI R5 R8 Farmer Publisher R20 R50

3. 3 SAPPI R5 + R0.70 R8 + R1.12 Farmer Publisher R20 + R2.80 R50 + R7

4. 4 SAPPI R5 + R0.70 = R5,70 Farmer Dr Bank (SFP) 5,70 Cr Sales (P/L)5,00 Cr VAT Output (SFP)0,70 Dr Raw material (SFP) 5,00 Dr VAT Input (SFP) 0,70 Cr Bank (SFP) 5,70

5. 5 SAPPI R5 + R0.70 = R5,70 Farmer Dr Bank 5,70 Cr Sales5,00 Cr VAT Output 0,70 Dr Raw material 5,00 Dr VAT Input0,70 Cr Bank 5,70 Price is R5.70 How much is the VAT?

6. 6 SAPPI R5 + R0.70 = R5,70 Farmer Dr Bank 5,70 Cr Sales5,00 Cr VAT Output 0,70 Dr Raw material 5,00 Dr VAT Input0,70 Cr Bank 5,70 How much is the VAT? R5,70 x 14/114 = R0.70

7. 7 SAPPI R9.12 Publisher

8. 8 SAPPI R9.12 Publisher Dr Bank (SFP) 9.12 Cr Sales (P/L) 8.00 Cr VAT Output (SFP) 1.12 Dr Raw material (SFP) 8.00 Dr VAT Input (SFP) 1.12 Cr Bank (SFP) 9.12

9. 9 Publisher R22.80 Dr Debtor (SFP)22.80 Cr Sales (P/L) 20.00 Cr VAT Output (SFP)2.80 Dr Trading stock (SFP) 20.00 Dr VAT Input (SFP) 2.80 Cr Creditor (SFP) 22.80

10. 10 R57 Pays R57 for the book

11. 11 R57 Dr Bank (SFP)57.00 Cr Sales (P/L) 50.00 Cr VAT Output (SFP) 7.00 Dr Cost of Sales (P/L)20.00 Cr Trading stock (SFP) 20.00 Pays R57 for the book NO VAT Input Dr Book57 Cr Bank57

12. VAT 12 -R57 x 14/114 = R7 VAT -The book will be sold for R57, of which R7 will be paid to SARS. -In total, SARS gets a net amount of R7 VAT (taxes). -Prices are quoted inclusive of VAT, unless stated otherwise.

13. VAT 13 -Input versus Output -Input: I claim back from SARS -Output: I owe SARS -Must settle the difference through VAT control account. Every month or every 2 nd month

14. VAT 14 -Must register as a VAT vendor to claim VAT input and charge VAT outputs. -VAT = invoice-based. -VAT Control = VAT Output – VAT Input

15. Example 8.1 15 Periodic vs Perpetual inventory system Inventory purchased for cash = R9 348 (Invoice price). Journal entry?

16. Example 8.1 16 Inventory purchased for cash = R9 348 (Invoice price). Journal entry? Dr Trade Inventory (SFP) 8200 Dr VAT Input (SFP) 1 148 Cr Bank (SFP)9 348 (9 348 x 100/114)

17. Example 8.2 17 Sold inventory for cash, R23 370 (incl VAT). Cost of trade inventories sold = R8 200 Journal entries

18. Example 8.2 18 Sold inventory for cash, R23 370 (including VAT). Cost of trade inventories sold = R8 200 Dr Bank (SFP)23 370 Cr VAT output (SFP) 2 870 Cr Sales (P/L)20 500 Dr Cost of sales (P/L) 8 200 Cr Trade inventory (SFP)8 200

19. VAT 19 -VAT Input = ASSET -VAT Output = LIABILITY

20. Example 8.3 20 Write off Receivable J’s debt as bad debt: R36 480 What was the original transaction when we sold goods to Receivable J?

21. Example 8.3 21 Write off Receivable J’s debt as bad debt: R36 480 What was the original transaction when we sold goods to Receivable J? Dr Receivable J (SFP)36 480 Cr Sales (P/L) (36 480 x 100/114)32 000 Cr VAT Output (SFP) 4 480

22. Example 8.3 22 Write off receivable J’s debt as bad debt: R36 480 Dr Bad debt (P/L)32 000 Dr VAT Input (SFP) 4 480 Cr Receivable J (SFP)36 480 (36 480 x 100/114)

23. Example 8.4 23 Recoupment of debt previously written off as irrecoverable: R2 850

24. Example 8.4 24 Recoupment of debt previously written off as irrecoverable: R2 850 Dr Bank (SFP)2 850 Cr VAT Output (SFP) 350 Cr Bad debts (P/L)2 500 (2 850 x 100/114)

25. Example 8.5 25 Trade inventories with a cost price of R20 000 (excluding VAT) withdrawn by the owner. What was our original journal entry when we purchased the trade inventory?

26. Example 8.5 26 Trade inventories with a cost price of R20 000 (excluding VAT) withdrawn by the owner. What was our original journal entry when we purchased the trade inventory? Dr Trade inventory (SFP)20 000 Dr VAT Input (SFP) 2 800 Cr Bank22 800

27. Example 8.5 27 Trade inventories with a cost price of R20 000 (excluding VAT) withdrawn by the owner. Dr Drawings (SCE)22 800 Cr VAT Output (SFP) 2 800 Cr Trade inventories (SFP)20 000 Deemed supply at Cost, i.e. Deemed VAT Output

28. Example 8.6 28 Trade inventories with a cost price of R17 500 (excluding VAT) donated to welfare.

29. Example 8.6 29 Trade inventories with a cost price of R17 500 (excluding VAT) donated to welfare. Dr Donation (P/L) 19 950 Cr VAT Output (SFP) 2 450 Cr Trade inventories (SFP)17 500 Deemed supply at Cost, i.e. Deemed VAT Output

30. VAT Input denied 30 Although VAT is charged and paid, a VAT INPUT is denied for: -Vehicles that are not delivery vehicles, -Entertainment, -Membership fees of clubs & associations VAT input is denied and forms part of the cost of the asset/expense

31. ZERO rated supplies 31 -Fuel -Certain (basic) foods: fresh vegetables, eggs, milk, bread, mealie-meal.

32. Exempt supplies 32 -Capital contributions/cash withdrawals by the owner, -Salaries & wages paid, -Financial services (example interest), -Letting of residential property, -Transport of passengers by means of taxis, busses, trains.

33. Events with no VAT effect 33 -Recording cost of sales -Depreciation -Year end adjustments for instance: prepaid insurance, stationery on hand -Allowance for doubtful debt

34. VAT Return 34 At the end of the VAT period (1 or 2 months), the vendor has to submit a VAT return to SARS. If Input > Output, SARS pays supplier. If Input < Output, Supplier pays SARS. Payment date: by 25 th of the next month.

35. Example 8.11 35 1)Record VAT Input and VAT Output to VAT control account; 2)Settle the VAT control account.