Question 1

Section A

A retailer sells goods for $1,440, which includes sales tax at a rate of 20%. The retailer also purchased goods for resale for $800 exclusive of sales tax.

What is the net amount payable to the tax authorities? (Enter the number only)

Accepted Answer

Calculate output tax (tax on sales) and input tax (tax on purchases). Net payable = Output tax - Input tax. Remember, $1,440 is tax-inclusive (120%), while $800 is tax-exclusive (100%).

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Calculating output tax as 20% of $1,440 ($288), forgetting it is a tax-inclusive figure.

Section A

A retailer sells goods for $1,440, which includes sales tax at a rate of 20%. The retailer also purchased goods for resale for $800 exclusive of sales tax.

What is the net amount payable to the tax authorities? (Enter the number only)

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA FA — Financial Accounting Practice Exam 5

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