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Chapter 32 – Exercises & Cases

Multiple Choice Questions​

  1. Food sales in restaurants are subject to: a) 17% VAT b) 14% VAT c) 8% VAT d) 3% VAT Answer: d) Food sales are subject to 3% VAT (reduced rate).

  2. Alcoholic beverages in restaurants are subject to: a) 3% VAT b) 8% VAT c) 17% VAT d) 14% VAT Answer: c) Alcoholic beverages are subject to 17% VAT (standard rate).

  3. Cash tips given directly to staff are: a) Business revenue b) Not business revenue c) Subject to VAT d) Recorded as service charges Answer: b) Cash tips given directly to staff are not business revenue.

  4. FIFO is particularly important for: a) All inventory b) Perishable inventory c) Only finished goods d) Only raw materials Answer: b) FIFO is particularly important for perishable inventory.

  5. Luxembourg uses: a) Sales tax b) VAT c) Both sales tax and VAT d) Neither Answer: b) Luxembourg uses VAT (Value Added Tax).

  6. For EU B2C e-commerce sales, VAT is: a) Luxembourg VAT b) Seller's country VAT c) Consumer's country VAT d) No VAT Answer: c) For EU B2C e-commerce sales, VAT is consumer's country VAT.

  7. Digital goods sold B2C are subject to: a) Seller's country VAT b) Consumer's country VAT c) No VAT d) Fixed rate Answer: b) Digital goods sold B2C are subject to consumer's country VAT.

  8. Job costing tracks costs by: a) Department b) Product line c) Individual job/order d) Time period Answer: c) Job costing tracks costs by individual job/order.

  9. Advance payments for services are recorded as: a) Revenue b) Unearned revenue (liability) c) Expense d) Asset Answer: b) Advance payments are recorded as unearned revenue (liability).

  10. Project accounting helps track: a) Only revenue b) Only costs c) Both revenue and costs by project d) Only time Answer: c) Project accounting helps track both revenue and costs by project.

Questions​

  1. Explain the differences in VAT treatment between food and beverages in restaurants. How should they be accounted for?

  2. What are the key considerations for retail inventory management? How do inventory valuation methods differ?

  3. How does professional services accounting differ from product-based accounting? What are the key challenges?

  4. Explain cross-border VAT rules for e-commerce. How do B2C and B2B transactions differ?

  5. What is job costing? How is it used in craft and artisan businesses?

  6. How should tips be accounted for in restaurant businesses? What is the difference between cash tips and service charges?

  7. Explain revenue recognition for professional services. How do advance payments and retainers work?

  8. What are the challenges of e-commerce accounting? How do payment processing and platform integration work?

  9. How should custom orders be tracked in craft businesses? What costs should be included?

  10. Compare and contrast inventory management for different sectors (restaurant, retail, craft).

Note: Complete solutions are available in the solutions manual.

End of Chapter 32 Exercises