Name ………………..… Skans ID ………………….

Sales Tax Marks. 30

1. Which transaction may give rise to an entry into the sales tax account?
-making a sale to a customer after offering them a trade discount
-writing off an irrecoverable debt where sales tax can be reclaimed from the tax authority.

A. i) only
B. ii) only
C. Both i) and ii)
D. Neither i) nor ii)

2. A business received goods returned by a customer that originally cost $1,000 plus sales tax of
20% and issued a credit note for this amount.
Which double-entry is the correct posting for the credit note issued?
A. DR Purchases $1,000, DR Sales tax $200, CR Trade payables $1,200
B. DR Sales $1,000, DR Sales tax $200, CR Trade receivables $1,200
C. DR Sales $1,200, CR Sales tax $200, CR Trade receivables $1,000
D. DR Purchases $1,200, CR Sales tax $200, CR Trade payables $1,000

3. A company makes sales on credit, subject to sales tax.

What entries to the general ledger are required?

A. CR Trade Receivables, CR Sales Tax, DR Sales

B. CR Trade Receivables, DR Sales Tax, DR Sales
C. DR Trade Receivables, CR Sales Tax, CR Sales
D. DR Trade Receivables, DR Sales Tax, CR Sales

4. A business registered for sales tax purchases goods from a supplier with a list price of $700,
exclusive of sales tax at 20%. The supplier grants the business a trade discount of 5%.
What amount should the business record for the purchase in the purchase ledger account?
A. $395.83
B. $475.00
C. $532.00
D. $570.00
5. In the month, a business has made purchases of $2,500 on credit and $1,000 for cash,
including sales tax at 20%.
What would be the amount posted in the Sales Tax general ledger concerning purchases?
A. $500
B. $583
C. $650
D. $875

6. The term tax point in connection with sales tax signifies?

A. The date which a transaction took place for sales tax purchase
B. The location of a sales tax registered business
C. Entering into a sale transaction, which is subject to sales tax with a customer
D. The supplier’s address quoted on a sales tax

7. If Sales (including Sales tax) amounted to $27,612.50, and Purchase (excluding Sales tax)
Amounted to $18,000, the balance on the Sales tax account, assuming all the items are subject
to tax at 20%, would be:
A. $1,002.08 Dr
B. $1,002.08 Cr
C. $1,922.50 Dr
D. $1,922.50 Cr

8. In the quarter ended 31 March 20X2, Chas had taxable sales, net of Sales tax, of $ 90,000 and
taxable purchases, net of Sales tax, of $ 72,000.
If the rate of Sales tax is 10%, how much Sales tax is due?
A. $ 1,800 receivable
B. $ 2,000 receivable
C. $ 1,800 payable
D. $ 2,000 payable

9. Laker had goods returned to him that had a net value of $200. What entries are required to
record this transaction if Sales tax is payable at 20%?
A. Dr Returns inward $200, Dr Sales tax $40, Cr Laker $240
B. Dr Returns inward $240, Cr Sales tax $40, Cr Laker $200
C. Dr Purchases $200, Dr Sales tax $40, Cr Laker $240
 D. Dr Laker inward $240, Cr Returns inward $200, Cr Laker $40

10. Sales tax on a credit sale is recorded:

A. By the supplier when the invoice is issued and by the customer when the invoice is
received
B. By the supplier when the invoice is issued and by the customer when the payment is
made to the supplier
C. By the supplier when the cash payment is received and by the customer when the
invoice
D. By the supplier when the cash payment is received and by the customer when the
cash payment is made

11. Which of the following statements are true?

1 Sales tax is a form of indirect taxation.
2 If input tax exceeds output tax the difference is payable to the authorities.
3 Sales tax is included in the reported sales and purchases of the business.
4 Sales tax cannot be recovered on some purchases.
A. 1 and 4
B. 1 and 2
C. 2 and 3
D. 3 and 4

12. Which of the following statements about Sales tax is true?

i. debit balance on the Sales tax account means that you owe money to HM Revenue &
Customs.
ii. For Zero-rated supplies you can re-claim input Sales tax but do not need to charge
output
iii. Sales tax Amounts shown in debtors are inclusive of Sales tax
A. (i) only
B. (i), (ii) and (iii)
C. (ii) and (iii)
D. (i) and (iii)
13. XYZ Co has the following balance extracted from its returns inwards record for a month.
Total (Inc Sales tax) $36,000, Sales tax $6000, net $30,000.
Which is the correct posting?
A. Dr sales returns $30,000, Dr Sales tax $6,000, Cr receivables $36,000
B. Dr purchase returns $30,000, Dr Sales tax $6,000, Cr payables $36,000
C. Dr sales returns $36,000, Cr Sales tax $6,000, Cr receivables $30,000
D. Dr purchases returns $36,000, Cr Sales tax $6,000, Cr payables $30,000

14. Who administrates Sales tax in the UK?

A. NICO
B. Local Authority
C. HMRC
D. Department for Trade

15. Rush Limited is registered for Sales tax. It made the following payments in the period
10-12 April.
10 April--$282 total payment for goods on which Sales tax is charged at the standard rate
11 April --$470 total payments for goods on which Sales tax is charged at the standard rate
12 April --$846 total payment for goods on which Sales tax is charged at a zero rate
The standard rate of Sales tax is 20%. Total amount of input Sales tax that has been paid on

these transactions will be _________