General journal entry for Value-added tax in transaction.
Prepare general journal entry to record the below transaction. Round off all amounts to the nearest whole number.
The Seed Factory (Pty) Ltd is a company that makes and distributes all types of food for birds and small pets. It needs to process the following transactions before the final trial balance at 31 December 2018 can be drafted. The company applies the periodic basis of accounting for inventory. VAT is applicable only where relevant. The company accounts for VAT on the invoice basis. Assume the VAT rate of 14%. The following still needs to be recorded prior to the extraction of a trial balance:
Based on the physical inventory count, finished bird and animal food, to the value of R120 000, was on hand at 31 December 2018. An amount of R20 000 in ingredients to make finished food batches was also on hand; of this R20 000, R12 000 from Fresh as a Daisy (a sole proprietor that is not registered for VAT) was received on the morning of the inventory count, on 31 December 2018, and the invoice is still to be received and accounted for by The Seed Factory (Pty) Ltd.