Explain what is meant by Output VAT and Input VAT

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Reference no: EM132572354

Question -

Part A - Your Uncle is an avid Hockey player and has been operating a store Elson's Hockey Supplies. The business has been doing quite well but your Uncle is not sure about VAT implications. He has asked you to assist him with the following queries.

a) When is a business required to register for VAT in Namibia?

b) Explain what is meant by Output VAT and Input VAT.

c) Explain the difference between a zero rated supply and an exempt supply.

Part B - Assuming that Elson's Hockey Supplies is a Namibian registered VAT vendor:

I. Prepare journal entries to account for the following transactions. Journal narrations are not required. Elson uses the perpetual inventory system to account for inventory and all transactions are on a cash basis. (4)

II. Determine the amount of VAT that is due from or payable to the Receiver of Revenue and indicate whether it is due or payable (1)

a) Purchases of Hockey sticks and balls for the month of March 2019, $28 500 (inclusive of VAT).

b) Sales of Hockey sticks and balls for the month of March 2019, $18 000 (exclusive of VAT), cost price $12 000 (exclusive of VAT).

c) Payment of salaries for the month of March 2019, $8 000.

Reference no: EM132572354

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