Example

1. Example Dr.Purchases 8 772 Dr. VAT Input 1 228 Cr. Bank 10 000 (10 000*100/114) Dr. Transport expense 2 632 Dr. VAT input 368 Cr. Bank 3 000 (3 000*100/114)

2. Example (cont�d) Dr. Import duties 1 000 Cr. Bank 1 000 NO VAT is charged on import duties as import duties is a tax on its own

3. Example � Total cost of inventory Purchases 2 000 Transport inwards 500 Transport outwards 400 Import duties on bags 100 Wages of staff to unpack bags on delivery at stall 200 Wages of delivery staff that Delivers bags to customers 300

4. Solution Purchases 2 000 Transport inwards 500 Import duties on bags 100 Wages�delivery at stall 200 2 800 Assuming a 50% mark-up on cost, calculate the selling price Selling price = cost + mark-up = 2 800 + 1400 (50%*2800) = 4 200

5. Purchases returns Example Returned 10 of the 50 bags bought in Lesotho. Value of the closing stock is R11 200 Periodic method Dr. Bank 2 000 Cr. Purchases 2 000

6. Example (cont�d) At the end of the accounting period: Dr. Cost of Sales (10 000-2 000) 8 000 Cr. Purchases 8 000 Dr. Cost of Sales 4 000 Cr.Transport expense 3 000 Cr. Import duties 1 000

7. Example (cont�d) Dr. Inventory 11 200 Cr. Cost of Sales 11 200 Dr. Cost of Sales Cr Purchases 8 000 Inventory 11 200 Transport 3 000 Balance c/d 800 Import duties 1 000 12 000 12 000