<P> By the timing of collection, VAT (as well as accounting in general) can be either accrual or cash based . Cash basis accounting is a very simple form of accounting . When a payment is received for the sale of goods or services, a deposit is made, and the revenue is recorded as of the date of the receipt of funds--no matter when the sale had been made . Cheques are written when funds are available to pay bills, and the expense is recorded as of the cheque date--regardless of when the expense had been incurred . The primary focus is on the amount of cash in the bank, and the secondary focus is on making sure all bills are paid . Little effort is made to match revenues to the time period in which they are earned, or to match expenses to the time period in which they are incurred . Accrual basis accounting matches revenues to the time period in which they are earned and matches expenses to the time period in which they are incurred . While it is more complex than cash basis accounting, it provides much more information about your business . The accrual basis allows you to track receivables (amounts due from customers on credit sales) and payables (amounts due to vendors on credit purchases). The accrual basis allows you to match revenues to the expenses incurred in earning them, giving you more meaningful financial reports . </P> <P> In general, countries that have a VAT system requires some businesses to be registered for VAT purposes . VAT registered businesses can be natural persons or legal entities, but countries have different thresholds or regulations specifying at which turnover levels registration becomes compulsory . Businesses that are VAT registered are obliged to include VAT on goods and services that they supply to others (with some exceptions, which vary by country) and account for the VAT to the taxing authority . VAT - registered businesses are entitled to a VAT deduction for the VAT they pay on the goods and services they acquire from other VAT - registered businesses . </P> <P> Value - added tax avoids the cascade effect of sales tax by taxing only the value added at each stage of production . For this reason, throughout the world, VAT has been gaining favor over traditional sales taxes . In principle, VAT applies to all provisions of goods and services . VAT is assessed and collected on the value of goods or services that have been provided every time there is a transaction (sale / purchase). The seller charges VAT to the buyer, and the seller pays this VAT to the government . If, however, the purchasers are not the end users, but the goods or services purchased are costs to their business, the tax they have paid for such purchases can be deducted from the tax they charge to their customers . The government only receives the difference; in other words, it is paid tax on the gross margin of each transaction, by each participant in the sales chain . </P> <P> In many developing countries such as India, sales tax / VAT are key revenue sources as high unemployment and low per capita income render other income sources inadequate . However, there is strong opposition to this by many sub-national governments as it leads to an overall reduction in the revenue they collect as well as of some autonomy . </P>

In vat which term is used for tax charge on sales
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