University:
Swansea University
Course:
BUS101 | Introduction to Business Ethics and Values
Academic year:

2021
Views:

179

Pages:

2
Author:

Thomas G.

Lecture Notes Title: “Taxation Equation: Managing VAT in Business Operations " Introduction • This lecture discusses the financial transactions involved in starting a business using the example of Mr. Luigi Carona's retail clothing venture. I. Initial Capital Injection • Mr. Luigi Carona's Decision • • Mr. Carona's choice to establish a retail clothing business. Capital Transfer • €800,000 transferred from his bank account to cash. II. Diverse Inventory Acquisition • Stocking the Business • Purchasing a varied range of clothing items to offer customers diverse choices. • Transaction Details • Total merchandise cost: €210,000, plus €24,000,000 in Value Added Tax (VAT). • Payment Method • Settling purchase invoices using bank checks, leaving €10,000,000 in available funds. • Balance with a payment period of 30 to 190 days. III. Business Commencement • Readying for Business • After these transactions, Mr. Carona is prepared to commence retail business operations. IV. Separating Business and Personal Finances • Effective Financial Management • Entrepreneurs should consider maintaining separate bank accounts for personal and business finances. • Funds can be transferred between these accounts as necessary to ensure clear financial separation. V. Understanding Value Added Tax (VAT) • Taxation Insights • Business purchases are subject to Value Added Tax (VAT), added to the invoice price of acquired goods. • Total Payment to Suppliers includes the cost of purchased goods and associated VAT. • VAT Credit: VAT paid to suppliers becomes a credit offsetting VAT owed to the government for sales of goods and services. • Proper VAT accounting is crucial for businesses. Conclusion • These financial transactions exemplify the steps involved in starting a business and managing finances effectively.