Înapoi la: ACCA – Financial Accounting 🟥
In this lesson you will learn:
- what is an income and when an entity may record an income according to IFRS
- how to record an income in the ledger accounts
- how to record the purchases made during the accounting period
- how to record the sales tax (or the VAT)
- how and when to account for discounts received or allowed
Accounting for sales
Recording sales – example
Accounting for purchases
Recording purchases – example
Sales tax (or VAT)
Accounting for discounts
This lesson in a nutshell:
Income = all increases in the wealth of the entity which is not contribution from shareholders
During the year, all the purchases made are recorded in an account named „purchases” (or similar) which must be a „period account” used to record only the purchases of the period. The „purchases” account, although a „period account” is an asset account.
The inventory account is NOT used during the year (normally).
Sales tax as well as VAT is a tax on consumption. As such, it is a tax supported by the (final) consumers, not by the business entities.
Sales tax is „collected” by entities from their clients and is further submitted to the state budget.
Sales Tax is always a % of the net price (NP).
The net price = the income of the entity.
The final price = the net price + sales tax = NP + %*NP = (1+%)*NP
The entities must submit to the state budget the total sales tax collected by them (through their sales) less the total tax already paid by them through their purchases.
The settlement discount is the discount allowed by the seller to receive the money faster.
The discount allowed = an expense incurred to receive the money faster
The discount received = an income realised by paying the money faster
Dictionary:
shadow account = an account used to decrease the „normal” balance of another corresponding account (e.g. „sales returned” = the shadow account for the „sales” account)
Revenue = Income from sales, income from the ordinary activity
VAT = Value Added Tax
Output sales tax = the sales tax collected by entities through their sales (through their outputs)
Input sales tax = the sales tax paid/to be paid by entities to their suppliers = the tax related to their inputs
You know it!
This lesson is not to be considered complete until you successfully solve the questions below 🙂
Use what you learned in this lesson and what you know from before and try your best!
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IMPORTANT!
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