A purchase (supplier sales) invoice document was received by your business. The net value recorded on the invoice document was E750 with VAT (standard rate input tax) of E147, giving a total invoice value of E897. The standard rate of VAT is20%. I Entering the invoice document details directly into your Sage computerised accounts file, the system auto-calculated VAT at £150 (Le. E750 x 20%). Which one of the following values (and explanations) for VAT is the CORRECT value to be recorded into the business accounts? Hide answer choices n The computer calculated value and invoice document value are both wrong and no value shouid be entered into the business accounts. There are clearly errors in both of the calculations and, in such cases, it is better to ignore VAT than to input an incorrect value onto the system. Where the document and the computer value are different, an average should be used for VAT (input tax). This would require a VAT value of E148.50 Le. (E150 + E147) + 2) to be entered into the business accounts. © The computer calculated value is correct and VAT of E150 (input tax) should be recorded into the business accounts. Where the document and the computer value are different, the document value should always be used. This is because the document represents the agreement between your business and the supplier. The computerised accounts system is, effectively, a calculator and will possibly produce an incorrect value (e.g. Where an early settlement discount is offered)
A purchase (supplier sales) invoice document was received by your business. The net value recorded on the invoice document was E750 with VAT (standard rate input tax) of E147, giving a total invoice value of E897. The standard rate of VAT is20%. I Entering the invoice document details directly into your Sage computerised accounts file, the system auto-calculated VAT at £150 (Le. E750 x 20%). Which one of the following values (and explanations) for VAT is the CORRECT value to be recorded into the business accounts? Hide answer choices n The computer calculated value and invoice document value are both wrong and no value shouid be entered into the business accounts. There are clearly errors in both of the calculations and, in such cases, it is better to ignore VAT than to input an incorrect value onto the system. Where the document and the computer value are different, an average should be used for VAT (input tax). This would require a VAT value of E148.50 Le. (E150 + E147) + 2) to be entered into the business accounts. © The computer calculated value is correct and VAT of E150 (input tax) should be recorded into the business accounts. Where the document and the computer value are different, the document value should always be used. This is because the document represents the agreement between your business and the supplier. The computerised accounts system is, effectively, a calculator and will possibly produce an incorrect value (e.g. Where an early settlement discount is offered)
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter8: Current And Contingent Liabilities
Section: Chapter Questions
Problem 7MCQ
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Transcribed Image Text:A purchase (supplier sales) invoice document was received by your business. The net value recorded on the invoice document was E750 with VAT (standard
rate input tax) of E147, giving a total invoice value of E897. The standard rate of VAT is20%.
Entering the invoice document details directly into your Sage computerised accounts file, the system auto-calculated VAT at £150 (Le. E750 x 20%).
Which one of the following values (and explanations) for VAT is the CORRECT value to be recorded into the business accounts?
Hide answer choices
The computer calculated value and invoice document value are both wrong and no value should be entered into the business accounts.
There are clearly errors in both of the calculations and, in such cases, it is better to ignore VAT than to input an incorrect value onto the
system.
Where the document and the computer value are different, an average should be used for VAT (input tax). This would require a VAT value of
E148.50 Le. (E150 • E147) + 2) to be entered into the business accounts.
The computer calculated value is correct and VAT of £150 (input tax) should be recorded into the business accounts.
Where the document and the computer value are different, the document value should always be used. This is because the document
represents the agreement between your business and the supplier. The computerised accounts system is, effectively, a calculator and will
possibly produce an incorrect value (e.g. Where an early settlement discount is offered)
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