VALUE-ADDED TAX (VAT) Chuckle Traders is registered for VAT, although the annual turnover is less than R1 000 000 - NSC Accounting - Question 1 - 2022 - Paper 2

To calculate the VAT payable to SARS, we need to first determine the total output VAT and then the total input VAT:

1. Total Output VAT:

   • Cash and credit sales (including VAT): R87 400
   • To find the VAT included in this amount, use: $\text{Output VAT} = \frac{15}{115} \times 87,400 = 11,400$
   • VAT on returns from debtors: R2,820
   • Total Output VAT = R11,400 + R2,820 = R14,220

2. Total Input VAT:

   • Purchases of trading stock (excluding VAT): R59,000
   • To find the VAT: $\text{Input VAT} = \frac{15}{115} \times 59,000 = 7,700$
   • VAT on drawings of trading stock by Chuckles: R2,000
   • VAT on discount received from suppliers: R3,360
   • Total Input VAT = R7,700 + R2,000 + R3,360 = R13,060

3. VAT Payable to SARS:

   • VAT Payable = Total Output VAT - Total Input VAT
   • VAT Payable = R14,220 - R13,060 = R1,160

1. Using the VAT funds to pay for business expenses is illegal and can lead to serious consequences such as legal action or penalties imposed by SARS if they find out.

2. Chuckles should consider budgeting his expenses better and managing his cash flow effectively to ensure he has enough funds to make the VAT payment on time, avoiding late penalties and maintaining compliance with tax regulations.