Question on AP2 thats bugging me

wbauk2002

Took AP2 and passed it woo

Im pretty sure I nailed the whole thing but one question I got stuck on and had to go back too

You had to compile the VAT account, and find the closing balance, so i got the opening balance, payments made to vat, vat on sales and purchases all in there but there was a Admin expenses box, cant remember the exact values but e.g £100 admin expenses, £20 VAT, Total £120, Then it said below that amount posted to admin expenses account £120

I ended up leaving the amount out of the VAT account as because i thought £120 out the bank, £120 into expenses, putting VAT anywhere would not balance. I would have put £20 into VAT and £100 into expenses if it hadnt have said full amount to expenses.

Anyone got any idea?

uknitty

Suggests to me that the actual item posted as an admin expense was either exempt from VAT or had VAT at 0 %.


It could have been something like stamps or train tickets. Another possibility comes from an example that I had when I did my unit 5 (which is now AP I and II) . I had a petty cash chitty to pay a window cleaner who was not VAT registered. The whole amount would be posted in this case because the window cleaner would not have added VAT to the original invoice, so we would not have to account for it in our books.

wbauk2002

Dont see how they can justify a question like that when all the study books say nothing about VAT

uknitty

The books say nothing at all about VAT but you were asked to calculate the sales and purchases VAT in a question ?

wbauk2002

No incomplete records, find the closing balance on vat account, you were given the sales and purchases amount of VAT, but my original question about why or why not the vat is included for admin expenses. AP1 and AP2 at the moment there is no work on VAT, that comes when you do indirect tax

uknitty

Could be any number or reasons why the admin item did not have VAT on it. I have aleady offered some suggestions (which is what I thought you were asking with your original post)

In terms of your exam question though to reconstruct the VAT account you don't need to know the *reason* why there was no VAT on the admin expenses you just take the information given in the question that Sales had X amount of VAT, Purchases had Y and admin had nil and so will not appear in the VAT account.

Jo Clark

wbauk2002 wrote: »

No incomplete records, find the closing balance on vat account, you were given the sales and purchases amount of VAT, but my original question about why or why not the vat is included for admin expenses. AP1 and AP2 at the moment there is no work on VAT, that comes when you do indirect tax

Hello

I could be wrong, however I am certain that VAT is covered in AP1 and AP2. I'll try and find the details and post them here for you. I have just looked at my AP2 book at it definitely covers VAT.

Sorry if you were not taught this or it was not covered in your text book. Which books are you using?


JC

Jo Clark

Hello

Try watching/working through this...

http://www.aat-interactive.org.uk/elearning/assessment_briefings/APII/player.html

The is a slide on the section called 'what you need to know' (slide number 3) which advises that 'information may be given in the form of day-books; these may include VAT information that needs to be dealt with correctly.

I have also attached the Accounts Preparation II - Learning Area Overview which makes mention of VAT.

Hope this helps.


JC

Jo Clark

Attachment as mentioned above

wbauk2002

Jo ive done both the AP1 and AP2 and this was the only VAT bit, passed it anyway, I went with my instinct and didnt include it so looks like it was the right way to go.

UKnitty not sure you read my post, wasnt VAT exempt and it says I paid VAT. £100 expenses and £20 VAT but says below total £120 goes into the admin expenses. in the exam it was more like £1907 i was just giving example

So the £20 VAT I paid should be reclaimable as Im registered for VAT too

Anyone else got an ideas? Maybe the question was wrong and should have just said the expenses amount, it defo said the total amount inc Vat as i read it over and over, then finished exam, then went back to it.

janwal

wbauk2002 wrote: »

Jo ive done both the AP1 and AP2 and this was the only VAT bit, passed it anyway, I went with my instinct and didnt include it so looks like it was the right way to go.

Hi

I have sat both AP1 & AP2 and we used BPP and did quite a bit on VAT, in my AP2 exam I had 2 questions on VAT including compiling VAT conreol account and finding closing balance.

Jan

Jo Clark

Hello Jan

That is what I thought, however it has been a while since I sat those two exams

Hope you are still finding CRS and CMGT enjoyable.


JC

wbauk2002

i got the bpp books and nothing on VAT for ap1 or ap2, i got the new books that say for exams sat after sep 2011

janwal

wbauk2002 wrote: »

i got the bpp books and nothing on VAT for ap1 or ap2, i got the new books that say for exams sat after sep 2011

College must have added that bit themselves then, but we certainly did refresh in it relating back to BA1 & BA2 from level 2. Most of us did know it from doing level 2

Can I ask out of curiosity why your so worried about it if you passed :confused1:

wbauk2002

Because I aim for 100% on each exam, I dont like not knowing something and scrapping a pass.

And was just wondering if someone could help me with it.

uknitty

I also thought that VAT was covered at level 2. It certainly was when I sat my level 2 exams. :huh:

If an item has VAT on it ( I origninally read the OP to mean why would an item posted to expenses not have VAT included but anyway...), if an item has VAT on it, then the VAT would be posted to the VAT account.

omega man

The question was correct you should have posted the vat to the vat control account.
If you think about it when you pay a supplier you credit the bank and debit the suppliers account in full even though there is vat on numerous invoices.
You therefore got the question wrong.

wbauk2002

I disagree, credit bank full amount, debit expense net, and debit vat with vat so it reduces your vat liability

omega man

I am afraid you got it all wrong here wbauk.
Try and think about it from the point of view of setting up an expenses account from fresh on sage.
Using your example £100 debit to expenses account,£20 debit to purchases tax control account and £120 credit to creditors control.
When the bill is paid its credit bank and debit creditors control.
The expenses account is sorted by a credit later on to income statement.The vat is sorted when you pay HMRC.
I am fairly confident this is correct.

uknitty

^^^^^^

Agree.