1. AC120 lecture 22 Completion of SSAP 4 Accounting for VAT

2. Example 4 Company A buys a fixed asset for €1 million. Depreciation policy is 25% straight line The company receives a government grant of €600,000 as a contribution towards the cost of the asset Grant income and expenditure amounts received and paid respectively before the financial year end. How should company A account for the grant and the fixed asset?

3. Accounting for VAT SSAP 5, issued in 1974 Value Added Tax is a tax charged on the supply of most goods and services Some trades and some firms are exempt depending on type of trade or size of business

4. Accounting for VAT VAT is borne by the ultimate consumer If a business is not the final consumer, the accounts of the business reflect its role as collector on behalf of the revenue authorities

5. Example 1 Organisation A is registered for VAT Sales of goods on credit to J Bloggs €100 Sales of goods for cash to J Bloggs €200 Purchases of goods on credit from N Maguire €50 Purchase of fixed asset €1,000 Amounts don’t include VAT. Applicable VAT rate is 10%.

6. Example 2 Organisation A is not registered for VAT Sales of goods on credit to J Bloggs €100 Sales of goods for cash to J Bloggs €200 Purchases of goods on credit from N Maguire €50 – N Maguire is registered for VAT! Purchase of fixed asset €1,000 – supplier is not registered for VAT Relevant amounts don’t include VAT of 10%

7. References Wood, chapter 20 Thomas, chapter 31