Journal entries of a Shopee sale

3 quick questions. Pick an answer to see why.

1. A ₱1,120 sale includes VAT. How much is the VAT?

₱134.40 (12% of ₱1,120) ₱120.00 ₱112.00

₱1,120 ÷ 1.12 = ₱1,000 before VAT, so the VAT is ₱120. Taking 12% of the full price over-counts, because the price already includes the VAT.

2. Why can Kuting Kitchen claim ₱7.71 back from Shopee's fees?

Because Shopee refunds it later Because fees are tax-free Because it's VAT paid on a business purchase, backed by Shopee's VAT invoice

VAT paid on business purchases (input VAT) is subtracted from VAT collected on sales (output VAT) on the 2550Q, but only with a valid VAT invoice.

3. What should you do with the ₱2.14 Shopee withheld?

Record it as tax already paid, keep the 2307, and subtract it on the income tax return Record it as a Shopee fee Ignore it; it's too small

It's your income tax, paid in advance by Shopee. Booked as a fee, it would be lost; with the 2307 it reduces what you pay on the 1702Q.