The following information is from the books of mokoena supermarket for July 2024 NB: use the current vat rate in South Africa 15%

Question

Calculate this question and record it in general journal

Buy trading stock on credit from build supplies for R1 372 excluding vat

Answer 1

When Mokoena Supermarket buys trading stock on credit, it needs to account for both the cost of the stock and the Value Added Tax (VAT) applicable to the purchase. In South Africa, the current VAT rate is 15%.

Let's break down the transaction:

1. Cost of trading stock excluding VAT: R1,372
2. VAT on the trading stock: \[ \text{VAT} = \text{Cost excluding VAT} \times \text{VAT rate} = R1,372 \times 0.15 = R205.80 \]
3. Total cost including VAT: \[ \text{Total cost} = \text{Cost excluding VAT} + \text{VAT} = R1,372 + R205.80 = R1,577.80 \]

General Journal Entry

Now, we'll record the purchase in the general journal:

Date: July 2024
Description: Purchase of trading stock on credit from Build Supplies

| Date | Account Titles and Explanation | Debit | Credit | |-------------|--------------------------------------------|----------------|------------------| | July 2024 | Trading Stock | R1,372.00 | | | | VAT Input (Input VAT) | R205.80 | | | | Accounts Payable - Build Supplies | | R1,577.80 | | | (To record the purchase of trading stock on credit) | | |

Explanation of Accounts:

• Trading Stock (asset account): Increases by the amount excluding VAT.
• VAT Input (Input VAT) (asset account): Increases by the VAT amount.
• Accounts Payable - Build Supplies (liability account): Increases by the total amount payable (including VAT).

This journal entry accurately reflects the transaction in the accounts of Mokoena Supermarket.