Hello Maria,
Multiple things you need to consider here:
* Payment terms to State (VAT) = 60 days
* Company charges VAT on sales at a rate of 20% and supports VAT on DM purchases at 20%
First of all, looking at the cash budget of Q1(N+1), you need to see what cash flows from VAT will occur. Because the payments terms are 60 days, you will have the difference in VAT from November N (to be paid in January N+1), December N (to be paid in February N+1) and January N+1 (to be paid in March N+1)
So, for every quarter, you need to calculate the difference in VAT collected on sales and VAT paid on DM Purchases. For example, for Q4 N you had sales of 55 000 units (440 000€ of VAT) and Purchases of 100 000 units (100 000€ of VAT), getting a difference of 340 000 €. 2/3 of this difference (corresponding to the months of November and December) will be paid in Q1 N+1
The other 1/3 will be from the total difference in VAT of Q1 N+1. Hope this is clear.
Good study!
Multiple things you need to consider here:
* Payment terms to State (VAT) = 60 days
* Company charges VAT on sales at a rate of 20% and supports VAT on DM purchases at 20%
First of all, looking at the cash budget of Q1(N+1), you need to see what cash flows from VAT will occur. Because the payments terms are 60 days, you will have the difference in VAT from November N (to be paid in January N+1), December N (to be paid in February N+1) and January N+1 (to be paid in March N+1)
So, for every quarter, you need to calculate the difference in VAT collected on sales and VAT paid on DM Purchases. For example, for Q4 N you had sales of 55 000 units (440 000€ of VAT) and Purchases of 100 000 units (100 000€ of VAT), getting a difference of 340 000 €. 2/3 of this difference (corresponding to the months of November and December) will be paid in Q1 N+1
The other 1/3 will be from the total difference in VAT of Q1 N+1. Hope this is clear.
Good study!