Explain why jacob zuze was advised to register for vat

Assignment Help Accounting Basics

Reference no: EM132132551

Question - Client - Jacob Zuze

Jacob commenced to trade on 1 September 2017 and prepared the first set of accounts for the sixteen months period ended 31 December 2018. Your firm advised Jacob to register for Value Added Tax (VAT) immediately he commenced to trade on 1 September 2017. He had bought goods for resale on 1 August 2017 for K125,000 (including VAT) and all of these goods were still available at 1 September 2017.

Jacob is now interested in knowing the total amounts of income tax and VAT that were payable by him for the period of trading ended 31 December 2018.

The statement of profit or loss for the period as shown below: Sales Revenue (excluding VAT)	1,600,000
Less:
Purchases (including goods bought on 1 August 2018)	806,200
Closing inventory	125,000
Cost of sales	(681,200)
Gross profit	918,800
Wages and salaries	235,000
Entertaining customers	119,000
Depreciation of motor vehicles	78,000
Overheads	276,080
Other revenue expenses	150,800
Total expenses	(858,880)
Net profit	59,920

Explain why Jacob Zuze was advised to register for VAT when he commenced to trade on 1 September 2017.

Reference no: EM132132551

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