Question

QUESTION FOUR W Vardy owns a general dealer shop for which he provides the following list of account balances for the six months ended 30 June 2020. Vardy was a little concerned about the shops trading results and requested your assistance. List of balances for six months ended 30 June 2020 R Inventory: trade goods at 2 January 2020 152 100 Consumable items 17 330 Purchases - cash 201 200 Purchases - credit 334 180 Sales - cash 711 500 Sales - credit 483 500 Goods returned by customers 74 200 Goods returned to suppliers 61 120 Railage inwards 45 500 Railage outwards 20 760 Import duty 34 Settlement discounts granted 28 600 Settlement discounts received 20 760 Additional information: 1. Physical stock-take took place on 30 June 2020 and inventories were valued at: Trade goods R145 660 Consumable items R 21 900 Required: 4.1 Prepare the "trading section" of the statement of profit or loss and other comprehensive income for Vardy's General Dealers for the six months ended 30 June 2020. Calculate the gross profit % on cost and the gross profit % on sales. 4.2 W Vardy was afraid to register as a VAT vendor as felt that registration affect the performance of the business because the VAT will consume some of his trading profit (gross profit). Advise Vardy about whether his fear is real.

Answer 1

This solution comprises Trading , comprehensive A/c and gp %.
-RANKA DATE 11 PAGE other comprehensive alc Amount Te Railage autward 20760 Buy by cross profit To pisciuntquante 28650 By discount Rece To Net poezit 1536/30 1585490 # Calculation of Gross prg; t/m Sales Gross poopit loo Total sales 564730 X 100 1/20 800 50.386/ سے

-RANKA DATE PAGE aution: 4:1 LW Vardy to Trading Afc Amount 152100 cash By Sales & for the period ended 30 juni 2020) Particulars Amount particulars To opening Inventory -Trade Goods 711500 Consumable 17330 Credit 483500 Items 1195000 To purchase O Reivon (74200) 1120800 Cash 20/200 By dosing stock Credit 334180 145660 535380 Consumable items 21900 Retom (61120) 474260 To Railage Inward 145500 To Gross profit 564730 1288360 1288360 Trade goods Totmpoét duty 34440

DATE PAGE # Calculation on Gross portit 40 m cost cost of Good Sole opening stock t purchase - closing stock [169430 + 474260 - 167560 ] 976130 bross prait of 564730 Xloo 476130 118.60%
Answer 4.2: Registration will not affect the performance of business even VAT has its own benefits w vardy can take the Input tax credit of goods purchased the fear is not not real .VAt has mant benefits as well

Claimed advantages for the VAT are that it would:

1. Be based on consumption, and thus provide a stable revenue base;
2. Be “neutral,” since it would be imposed on all types of businesses;
3. Provide stronger incentives for businesses to control costs;
4. Encourage, or at least not discourage, savings;
5. Have the potential for raising large amounts of revenue at a low tax rate;
6. Be simple to administer;
7. Reduce obstacles to exports, under certain conditions;
8. Help bring about a better balanced tax system.