Accounting Q&A · Taxation · Topic 2
Try each of the 25 questions before revealing its answer. The rates and amounts in the exercises are hypothetical. For an actual return, check the rules for the jurisdiction and tax year.
Worked example
A shop sells an item for 200 before a hypothetical 10% transaction tax. The invoice totals 220. The seller collects 20 for remittance under the exercise assumptions.
Key concepts
1. What is a direct tax in a common introductory classification?
A tax levied directly on a person or entity, typically on income, profits or wealth.
2. Give an example of a direct tax.
Individual income tax is a common example.
3. What is an indirect tax?
A tax generally charged on transactions, goods or services and collected through an intermediary.
4. Give an example of an indirect tax.
Value added tax is a common example.
5. What is statutory incidence?
Who the law identifies as liable to account for or pay a tax.
6. What is economic incidence?
Who ultimately bears the cost after prices and behaviour adjust.
7. Can a direct tax affect people other than the legal taxpayer?
Yes. Wages, returns or prices may change in response.
8. Does a retailer always pass all indirect tax to buyers?
Pass-through depends on pricing, competition and how buyers and sellers respond.
9. What is an excise tax?
A tax on specified goods or activities, sometimes based on quantity or value.
10. What is customs duty?
A charge imposed on specified goods crossing a customs border under applicable law.
Practice and calculations
11. What is an ad valorem tax?
A tax calculated as a percentage of the applicable value.
12. What is a specific tax?
A fixed amount per unit, such as an amount per litre.
13. What is a tax-exclusive price?
A price stated before the relevant tax is added.
14. What is a tax-inclusive price?
The total price with the relevant tax already included.
15. What is 12% tax on an exclusive price of 250?
30, for a total invoice of 280.
16. A price of 110 includes tax at 10%. What is the tax?
10. Divide 110 by 1.10 to find the base of 100.
17. A specific tax is 2 per unit on 45 units. What is due?
90.
18. How is sales tax collected for remittance generally recorded in a simple example?
Recognise it as a liability separate from the seller’s sales revenue.
19. What does zero-rating generally mean in a VAT system?
A taxable supply is charged at 0%, with credit eligibility governed by local rules.
Review and filing checks
20. How can exemption differ from zero-rating?
Exempt supplies generally bear no output VAT but may restrict related input credit.
21. Is withholding a separate category of direct or indirect tax?
It is a collection mechanism. Classify the underlying tax separately.
22. What can make a consumption tax regressive relative to income?
Lower-income households may spend a greater proportion of income on taxed consumption.
23. Why might tax classifications vary across sources?
Different reporting systems group taxes by base, collection method or legal design.
24. Which documents support indirect tax reporting?
Invoices, credit notes, import records and sales summaries as applicable.
25. How should you compare two taxes in an exam?
Identify the base, legal payer, collection method and likely economic burden.
For Bangladesh income tax legislation and amendments, consult the National Board of Revenue.