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VAT Taxes/ VAT Recievables

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Can someone please explain VAT Taxes and VAT Receivable?

Thanks.

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Solution Summary

The solution gives a detailed description of VAT, including numerical examples.

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Thank you for posting today. It is my goal to provide ideas, definitions, research help, and instructions on how you, the student, should approach the assignment.

VAT, or value-added tax, is a consumption tax which is simliar in nature to a sales tax, but is a little different. In sales tax, the consumer pays the entire tax, usually at the point of sale. With the VAT, the tax is levied at each point exchange of the good where its value is increased. A good example is orange juice. The oranges are taxed, then the supplier is taxed on the juice, then distributer is taxed on the markup they charge, and then the retailer charges the tax at the point the item is bought.

"Example
Consider the manufacture and sale of any item, which in this case we will call a widget.

Without any sales tax
A widget manufacturer spends $1 on raw materials and uses them to make a widget. ...

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