WALTER SISULU UNIVERSITY

FINANCIAL/LEGAL ACCOUNTING

ACC15W0/LAC37W1

VALUE ADDED TAX (VAT)

TUTORIAL SOLUTIONS

Material Question Handed in by… Due Date

Number

Tut solution 1 PRACTICE

VAT
Tut solution 2 PRACTICE

Tut solution 3 Excluded

Tut solution 4 SUBMISSION

TUTORIAL SOLUTION 1 (21 MARKS: 26 MINUTES)

1. Memorandum From: WSU

Student
To: Ms. Sibanyoni
Date: 21 July 2015
RE: Concerns regarding the VAT calculation

Dear Ms. Sibanyoni,

I have reviewed your VAT calculation and I have the following concerns:

Issue Identified Correct Treatment

Output VAT charged on Sales(½) I agree with the treatment(½)
Contribution by owner included in the I disagree with the treatment. The capital
calculation. (½) contribution by the owner does not
represent a sale of goods or a provision of
a service/income (1). The amount should
not be included in your calculation/It is
incorrect to include the capital contribution
in your calculation (1)

Receipt from prior-year debtor included. I disagree with the treatment. The receipt

(½) of R2 750 from a debtor represents a

receipt from the sale of goods in the
previous year/months (1). The output VAT
on this amount would have been recorded
when the sale was made in January 2014
(1). It is incorrect to include this amount in
your VAT calculation for April 2015 as this
would amount to double-counting for
Output VAT. (1)

Input VAT claimed on purchase of I agree with the treatment (½)

Inventory(½)
Input VAT claimed on purchase of I agree with the treatment (½)
Stationery(½)
Input VAT calculated on purchase of I disagree with the treatment. Input VAT
diesel(½) cannot be claimed on items which do not
carry VAT (1). Looking at your calculation,
diesel is a zero-rated item which implies that
we did not pay VAT on the purchase of the
diesel (1). Since we did not pay VAT on this
purchase, we cannot claim input VAT from
SARS (1). Therefore, the amount of R500
for the purchase of diesel should not be
included in your calculation.
(1)

Input VAT calculated on Salaries and I disagree with the treatment. Salaries and
wages(½) wages are not vatable/are exempt (1).
Since there is not VAT included in
salaries, we are not allowed to claim any
input VAT (1). The salaries and wages
should not be included in your calculation.
(1)
 VAT on Drawings omitted. (½) I disagree with the treatment. The
bedroom suite taken by Mr. Hlubi (the
owner) on 25 April 2015 has not been
included in your calculation above and this
is incorrect (1). When the bedroom suite
was acquired, input VAT was claimedfrom
SARS, however, the bedroom suite is now
taken for the owners’ use and will no
longer be sold or used in the business. (1)
Output VAT should be raised to reverse the
input VAT
that we initially claimed
when we purchased this item. (1)

Interpreted the net VAT incorrectly/Stated I disagree with the treatment. Based on
VAT receivable instead of VAT payable. your calculations, output VAT is more than
(½) Input VAT, which implies that we have a
net output VAT that we need to pay over
to SARS (1). Your calculation indicates
that we have a VAT receivable from
SARS, which is incorrect. (1)

Conclusion: Based on the above concerns, your VAT calculation needs to be revised and
corrected. (1)
Maximum marks for content: 15
Correct MEMO format: 1
Headings/presentation: 1
Maximum: 17 2.

DR VAT Control CR

Date Details Amount Date Details Amount

05/04 Trade payable 5 576(½) 25/04(½) Drawings(½) (12500X15/100)(½) 1 875(½)
12/04 Bank 178(½) Trade Receivable 13 011(½)
30/04 Balance c/d 9 132(½)

14 886 14 886
TUTORIAL SOLUTION 2

1. 9 Marks

Output VAT: R2 590 000(½) x 15%(½) = R388 500

Input VAT:

Purchases R872 000(1) + Water and electricity R32 000(½) + Marketing expense R27
250(½) + Telephone expense R43 700(½) = R974 950

+1 for not including salaries and wages AND interest expense

R974 950(½m) x 15%(½) = R146 243

R388 500(½) – R146 243 (½) = R242 257

Statement of Financial Position of Beachfront Crafts as at 28 February 2014(½)

LIABILITIES(½)

Current liabilities(½)

SARS(VAT) (½) R242 257 (½)

2. 1 mark
Beachfront Crafts is a registered vat vendor because it has turnover of greater than R1
000 000 and as such would have been required to register as a VAT vendor. (1)

3. 2 Marks
These products are zero rated in order to keep the goods accessible to the needy. (1)
VAT at 15% would increase the prices of these essential items, making them
unaffordable to the needy. (1)

4. 2 Marks
Mielie meal(1), maize(1), sunflower oil etc maximum 2 marks

5. 12 Marks (Excluded from the scenario)

28/02/2014 DR CR
Telephone expense(½) 2 807 (½)
VAT Asset (1) 421(½)
Accrued expense(½) 3 228(½)
Recognition of telephone expense accrual (½)
R3 228(½) x 15/115(½) = R421

01/03/2014
Accrued expense(½) 3 228(½)
Telephone expense(½) 2 807(½)
VAT Asset (½) 421 (½)
Reversal of prior year adjustment(½)

15/03/2014
Telephone expense(½) 2 807(½)
VAT Asset (1) 421 (½)
Bank(½) 3 228(½)
Payment of telephone expense(½)
TUTORIAL SOLUTION 4 (29 MARKS)

1. 5 Marks
R R
DEBIT CREDIT
Drawings(½) 2400(½)
Inventory(½) 2 087(1)
VAT input(½) 313(½)
Workings: R6 000(½) x 40/100(½) = R2400
R2 400 x 15/11(½) = R313
2. 8 marks
R R
DEBIT CREDIT
06/06/2014(½)
Trade receivables(½) 320 000(½)
VAT output(½) (R320 000(½) x 15/115(½)) 41 739(½)
Bad debts recovered(½) (R320 000 – R41 739) (½) 278 261(½)
Re-instatement of debtor(½)

28/06/2014(½)
Bank(½) 320 000(½)
Trade receivables(½) 320 000
Receipt of payment from debtor(½)
3. 10 Marks
R R
DEBIT CREDIT
Trade payables (½) 31 050 (½)
VAT input (1) 243 (½)
Interest income (½) 1 620 (½)
Bank (½) 29 187 (½)

R4 500(½) x 6(½) x 1.15(½) = R31 050 R31

050(½) x 94%(½) = R29 187
R31 050 x15/115 = R4 050
R29 187 x 15/115 = R3 807
R4 050 – R3 807 = R243
OR
R31 050 (½) – R29 187 (½) = R1 863 (½) x 15/115 (½) = R243
R1 847 (½) – R243 (½) = R1 620
4. 6 marks
1. 4 marks
R R
DEBIT CREDIT
 Accrued expense(½) 9 690 (½)
Telephone expense(½) 8 415 (½)
Temporary VAT asset(½) 1 275 (½)
R 8 500 (½) x 15% (½) = R1 275

2. 2 marks
VAT input should be recognised at the earlier (1) of payment(½) or receipt of invoice(½). (2)