Mr, Smith is a registered VAT vendor. He brought a computer for R115 000 (including VAT) inMarch 2021. He intended to use it for business purposes. He derived 80% of the income fortaxable supplies and 20% for exempt supplies.He uses the turnover apportioned method inrespect of the computer acquired. At the end of February 2023, Mr Smith has stated that theusage has changed to 60% taxable and 40% for exempt supplies. At this date the open marketvalue is r82 340.00. How should Mr Smith account for the decrease in use of taxable supplies.

Value Added Tax (VAT) is a consumption tax levied on the value added to goods and services at each…

Answered: value is r82 340.00. How should Mr…

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value is r82 340.00. How should Mr Smith account for the decrease in use of taxable supplies.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Deferred Tax

Deferred tax is an estimated future tax which is made while preparing accounts. It is estimated as a result of past and present transactions in the financial statements. It is not the actual tax which needs to be paid or refundable from the revenue authority, it is an accounting entry. It exists because of the difference between accounting profits and taxable profits.

Question

Mr, Smith is a registered VAT vendor. He brought a computer for R115 000 (including VAT) in
March 2021. He intended to use it for business purposes. He derived 80% of the income for
taxable supplies and 20% for exempt supplies.He uses the turnover apportioned method in
respect of the computer acquired. At the end of February 2023, Mr Smith has stated that the
usage has changed to 60% taxable and 40% for exempt supplies. At this date the open market
value is r82 340.00. How should Mr Smith account for the decrease in use of taxable supplies.

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