Question 3d
2014 | £ |
---|---|
September | 26,000 |
October | 47,000 |
November | 134,000 |
December | 113,000 |
On 1 November 2014, the company signed a contract valued at £86,000 for completion during November 2014.
All of the above figures are stated exclusive of value added tax (VAT). Smart Ltd only supplies services and all of the company’s supplies are standard rated.
Smart Ltd allows its customers 60 days credit when paying for services, and it is concerned that some customers will default on the payment of their debts. The company pays its purchase invoices as soon as they are received.
Smart Ltd does not use either the VAT cash accounting scheme or the annual accounting scheme.
Required:
(d) Advise Smart Ltd as to why it should be beneficial for the company to use the VAT cash accounting scheme. (3 marks)