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General rule and Key words for VAT: Base  the price before tax Tax  percent of base

General rule and Key words for VAT: Base  the price before tax Tax  percent of base Total  price + tax Amount to pay  the difference between VAT of sales and VAT of purchases. Calculation of VAT Tax = base * tax percent Total = base + tax value

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General rule and Key words for VAT: Base  the price before tax Tax  percent of base

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  1. General rule and Key words for VAT: • Base  the price before tax • Tax  percent of base • Total  price + tax • Amount to pay  the difference between VAT of sales and VAT of purchases.

  2. Calculation of VAT Tax = base * tax percent Total = base + tax value Total = base * (1 + tax percent) Base = total / (1+ tax percent)

  3. Case: Vat 16% The following are some information for Jaber &sons Company, and tax registration number 900576398 for 12/2006: Purchases : • On 3/12 purchased on credit 5 fridges amounted 3000 NIS for each, not include VAT from Naser Company invoice # 64. • On 7/12 purchased 5 TVs 16 inch with price 1300 per unit, and 6 TVs 20 inch with price 1700 per unit and the price not include VAT, invoice # 257. • On 16/12 purchased 10 fans with price 105 per unit include VAT and 8 heaters with price 120 per unit include VAT from Sharaf Company invoice # 346 with cheque. • On 31/12 paid PALTEL expense invoice # 791 with amount 232 and delayed to tax report 1/2007. • On 31/12 bring back 2 fridges to Naser company and get sales return invoice # 6.

  4. Sales: • On 3/12 sold 3 fridges with total value 12600. • On 15/12 sold 4 SONY TVs 16 inch with price 1800 includes VAT and 6 TVs 20 inch with price 2200 include VAT with cheque. • On 23/12 sold 8 fans with price 760 for all for the base value by cheque. Assume:VAT = 16%

  5. Required: • Prepare the statement of sales and purchases for 12/2006 • Determine the amount to pay or return with recording the entry. • Record the entry for PalTel invoice delayed. The answer

  6. Purchase statement:

  7. Sales statement

  8. Notes: • Invoices delayed not appear in the statement of tax. • There is ability to delay invoices of purchases and expenses for 6 months from the date of purchasing. • We have no ability to delay sales invoices. >> We can delay the tax amount not the invoices. Q. when there is purchase or expense invoice at the end of the year, and we need to delay it, so we delay …… • The base value • The total value • The tax value

  9. Purchase entries

  10. Sale entries

  11. The entry for preparing the statement of 12/2006: VAT 284 Accrued VAT 284 The entry of delaying invoice (Paltel): VAT under adjustment 32 VAT 32 Entering the Paltel invoice for the statement 1/2007 VAT 32 VAT under adjustment 32 According to the tax law (VAT must be paid before (15/1/2007) The entry of accrued VAT will be: Accrued VAT 284 Cash 284 >> In tax – out tax = 4,673 – 4,389 = 284 So, profit = the amount to pay × (100/16) = 284 × (100/16) = 1,775

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