Accounting for Attorneys
COALA1-B44
Eduvos (Pty) Ltd (formerly Pearson Institute of Higher Education) is registered with the Department of Higher Education and Training as a private higher education institution under the
Higher Education Act, 101, of 1997. Registration Certificate number: 2001/HE07/008
Review and Lesson Structure
Lesson 1 VAT
Lesson 2 Prime books of entry
What will be covered in
today’s lesson?
Lesson
What is VAT & Registration for VAT
Value Added Tax
The 4 VAT Categories
The 2 Types of VAT
VAT Calculations
Net VAT Amount
Value Added Tax (VAT)
vIs a tax charged on the consumption
of goods and services
vThe current rate in South Africa is
15%
Who charges VAT ?
Registered VAT Vendors
vVoluntary Registration
vCompulsory Registration
VAT CATEGORIES:
#1 Standard Rated Supplies
Any goods or services where VAT is
charged at the prevailing rate of 15%
e.g goods sold
VAT CATEGORIES:
#2 Zero Rated Supplies
Any goods or services where the
government has currently reduced
VAT to 0%
e.g fuel
VAT CATEGORIES:
#3 Exempt Supplies
Any goods or services where VAT is
never applied at all
e.g salaries and wages
VAT CATEGORIES:
#4 Prohibited Inputs (Non –Allowable Item
Any goods or services where input
VAT cannot be claimed
VAT Calculations
Amount Excluding VAT = 100%
VAT = 15%
Amount Including VAT = 115%
What I want x Amount l have
To Calculate
What l have
Anything
• Do not press %
Types of VAT : Output Tax
VAT Output and VAT Input
VAT Output
This is VAT charged to customers by registered VAT vendors on goods supplied or services rendered
Types of VAT : Output Tax
VAT Input
This is VAT claimed back by registered VAT vendors on their purchases or acquisitions
Net VAT Amount
Total VAT Output XXXXX
Less : Total VAT Input (XXX)
Net VAT Payable / XXXX
(Refundable)
Class activity 1
For each transaction, indicate whether input VAT, output VAT or
no VAT is applicable.
Where no VAT is indicated, give a reason
1. Received cash for sales, R60 951.
2. Purchased trading stock on credit, R42 000 (exclusive of VAT).
3. Received interest on the current account of R248.
4. Paid electricity of R5 980.
5. Spent R520 on diesel.
6. Sold merchandise to a F. Zwide on credit, R16 330.
7. Purchased office furniture from Oak Industries for R11 895
(excluding VAT) on credit.
8. Paid salary and wages, R12 000
Class activity 1 memo
For each transaction, indicate whether input VAT, output VAT or
no VAT is applicable.
Where no VAT is indicated, give a reason
1. Sales – Output VAT
2. Purchases of trading stock – Input VAT
3. Interest on the current account – No VAT, Exempt
4. Paid electricity – Input VAT
5. Diesel – No VAT, Zero-rated
6. Credit sale- Output VAT
7. Furniture- Input VAT
8. Salary and wages – No VAT, Exempt
Class activity 2
Total VAT Output XXXXX
Calculate Net VAT Payable/(Refundable)
Less : Total VAT Input (XXX)
Net VAT Payable / XXXX 1. Received cash for sales, R60 951.
(Refundable) 2. Purchased trading stock on credit, R42 000 (exclusive of VAT).
3. Received interest on the current account of R248.
4. Paid electricity of R5 980.
5. Spent R520 on diesel.
6. Sold merchandise to a F. Zwide on credit, R16 330.
7. Purchased office furniture from Oak Industries for R11 895
(excluding VAT) on credit.
8. Paid salary and wages, R12 000
Class activity 2 memo
Total VAT Output XXXXX Calculate Net VAT Payable/(Refundable)
Less : Total VAT Input (XXX) 1. Received cash for sales, R60 951.
Net VAT Payable / XXXX
2. Purchased trading stock on credit, R42 000 (exclusive of VAT).
(Refundable) 3. Received interest on the current account of R248.
4. Paid electricity of R5 980.
5. Spent R520 on diesel.
6. Sold merchandise to a F. Zwide on credit, R16 330.
7. Purchased office furniture from Oak Industries for R11 895 (excluding
VAT) on credit.
8. Paid salary and wages, R12 000
Output VAT = (60 951 × 15/115) + (16 330 × 15/115)
= 7 950 + 2 130= R10 080
Input VAT = (42 000 × 15/100) + (5 980 × 15/115) + (11 895 × 15/100)
= 6 300 +
780 + 1 784 = R8 864 ✓
Amount payable to SARS = R10 080 − R8 864 = R1 216
What will be covered in
today’s lesson?
Lesson
Books of Discuss the different Source Documents
Prime Entry
Identify the respective journals
Calculate VAT in transactions
Record transactions in related
journal
Books of Prime Entry are a link between source documents and ledger accounts. They are done is chronological
order, with the intention to reduce risks
Journals to be covered:
• Business cash books (Cash payment journal and Cash receipts journal)
• Business Petty cash book
• Cash books
• Fees journals
• Sheriffs and advocate journal
• General journal
• Trust journal
• Transfer journal
Cash books: record all cash transactions for both the business and the trust ( Client’s money)
1. Cash receipts journal: records cash received
2. Cash payment journal: records cash payments made
Business cash books
Cash receipts journal Cash payment journal
CRJ Sundry account CPJ Sundry account
column: column:
• Capital contribution • Wages
• Commission income • Stationery
• Interest received • Printing
• Transfer from trust • Payment of other
bank account expenses
Class example 1
Prepare the following:
General ledger
Business cash books
Class example 1 memo
Prepare the following:
General ledger
Business cash books
Cash books: record all cash transactions for both the business and the trust ( Client’s money)
3. Petty cash journal: payments for small expenses on behalf of the practice and the client
Petty cash journal:
Receipts Payments
Cash books: record all cash transactions for both the business and the trust ( Client’s money)
3. Petty cash journal: payments for small expenses on behalf of the practice and the client
Petty cash journal:
Receipts Payments
Cash books: record all cash transactions for both the business and the trust ( Client’s money)
1. Cash receipts journal: records cash received
2. Cash payment journal: records cash payments made
Trust cash books
Cash receipts journal Cash payment journal
Sheriffs and advocate journals:
Records claims for services rendered on credit by sheriffs/advocates
Sheriffs journal
General journal:
Records transactions that are recorded in the previous journals, such
as:
General journal
Class example 2
Consider to following transactions
1 Jun ‘Rabbit’s Trust’ creditor’s account has a balance of R800 000 in the books of Pretoria
Attorneys. Rabbit authorises Pretoria Attorneys to invest this money in an interest-bearing account
with Trust Bank until the transfer of the property is affected. The balance of the trust banking
account is also R800 000.
30 Jun The transfer of property is registered, and Pretoria Attorneys receives R850 000. This money
is re-deposited in the trust banking account.
Prepare the following:
Trust Cash Book
Trust Journal (narrations required)
