Essential Book Keeping - QP4 | Attempts: 120

2.

VAT can be described as: “A tax on final consumer spending, collected in stages, when goods change hands or services are performed”.

True
False

Correct Answer

A. True

Explanation

VAT, or Value Added Tax, is indeed a tax that is imposed on the final consumption of goods and services. It is collected in stages, meaning that it is applied at each stage of the production and distribution process when goods change hands or services are performed. This tax is ultimately borne by the final consumer, as it is included in the price of the goods or services. Therefore, the statement that VAT is a tax on final consumer spending, collected in stages, when goods change hands or services are performed is true.

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3.

When sales turnover reaches a certain level, the business has to register with HMRC through their local VAT office. The registration threshold from April 2006 was ______.

£41,000
£51,000
£61,000
£71,000

Correct Answer

A. £61,000

Explanation

When a business's sales turnover exceeds a certain level, it becomes mandatory for the business to register with HMRC through their local VAT office. From April 2006, the registration threshold was set at £61,000. This means that if a business's sales turnover reached or exceeded £61,000 in a given period, it was required to register for VAT with HMRC.

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4.

In Britain, there are currently four broad categories of VAT. These are:

Standard Rate
Standard Term
Zero Term
Zero Rate
Exempt Provides
Exempt Supplies
Special Higher Rate
Special Lower Rate

Correct Answer(s)

A. Standard Rate
A. Zero Rate
A. Exempt Supplies
A. Special Lower Rate

Explanation

The given answer correctly identifies the four broad categories of VAT in Britain. The Standard Rate refers to the standard percentage of VAT that is applied to most goods and services. The Zero Rate refers to goods and services that are exempt from VAT. Exempt Supplies are goods and services that are not subject to VAT at all. Lastly, the Special Lower Rate refers to a reduced rate of VAT that is applied to specific goods and services.

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5.

True
False

Correct Answer

A. False

6.

The main items of information required to complete the VAT 100 form are: (Select three)

Output tax charged to customers
Input tax charged by suppliers
Value of sales, inclusive of VAT
Value of purchases, inclusive of VAT
Sales and purchase information relating to the EU.

Correct Answer(s)

A. Output tax charged to customers
A. Input tax charged by suppliers
A. Sales and purchase information relating to the EU.

Explanation

The main items of information required to complete the VAT 100 form are the output tax charged to customers, input tax charged by suppliers, and sales and purchase information relating to the EU. These three pieces of information are necessary for accurately reporting and calculating the VAT liability. The output tax charged to customers represents the VAT collected from sales, while the input tax charged by suppliers represents the VAT paid on purchases. Including sales and purchase information relating to the EU is important for compliance with VAT regulations when conducting business with EU countries.

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7.

Under the Cash Accounting scheme, VAT is accounted for on the basis of cash paid and cash received in a period.

True
False

Correct Answer

A. True

Explanation

Under the Cash Accounting scheme, VAT is indeed accounted for on the basis of cash paid and cash received in a period. This means that VAT is only recorded when the payment is made or received, rather than when the invoice is issued or received. This method is beneficial for businesses with fluctuating cash flows as it allows for better management of VAT payments.

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8.

To qualify for the flat rate VAT scheme, a business must have: (Select two)

They must have been registered for 12 months, and
They must have a taxable turnover below £825,000
No more than £150,000 taxable supplies, and
No more than £187,500 total business income.

Correct Answer(s)

A. No more than £150,000 taxable supplies, and
A. No more than £187,500 total business income.

Explanation

To qualify for the flat rate VAT scheme, a business must have a taxable turnover below £825,000. Additionally, the business must have no more than £150,000 taxable supplies and no more than £187,500 total business income. These criteria ensure that the business falls within the specified thresholds for turnover, taxable supplies, and total income, making them eligible for the flat rate VAT scheme.

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9.

Taxable persons must keep their records and accounts up-to-date and are legally obliged to preserve them, with all supporting receipts etc., for a period of seven years.

True
False

Correct Answer

A. False

Explanation

Taxable persons are indeed required to keep their records and accounts up-to-date, but they are legally obliged to preserve them for a period of six years, not seven. Therefore, the given statement is false.

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Essential Book Keeping - Qp4

VAT is a direct tax which enables the Government to tax consumer expenditure on a very wide scale.

VAT can be described as: “A tax on final consumer spending, collected in stages, when goods change hands or services are performed”.

When sales turnover reaches a certain level, the business has to register with HMRC through their local VAT office. The registration threshold from April 2006 was ______.

In Britain, there are currently four broad categories of VAT. These are:

The main items of information required to complete the VAT 100 form are: (Select three)

Under the Cash Accounting scheme, VAT is accounted for on the basis of cash paid and cash received in a period.

To qualify for the flat rate VAT scheme, a business must have: (Select two)

Taxable persons must keep their records and accounts up-to-date and are legally obliged to preserve them, with all supporting receipts etc., for a period of seven years.