# Tax problem

This topic contains 8 replies, has 5 voices, and was last updated by  joseph89 4 years, 4 months ago.

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The following information relates to Eva Co’s sales tax for the month of March 20X3:
Sales (including sales tax) 109,250
Purchases (net of sales tax) 64,000
Sales tax is charged at a flat rate of 15%. Eva Co’s sales tax account showed an opening credit balance of
\$4,540 at the beginning of the month and a closing debit balance of \$2,720 at the end of the month.
What was the total sales tax paid to regulatory authorities during the month of March 20X3?

littlestart
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Draw a T account would help to sort this out

sales tax for this month = 14250
x +15%x = 109250 so x= 109250 / 1.15 = 95000
15%x = 95000*15% = 14250
Purchase tax for this month = 64000 *15% = 9600
sales tax account
Dr side = 9600 + 2720 = 12320
Cr side = 4540 + 14250 = 18790
the difference = 18790 – 12320 =6470 which is the amount that we need to pay to authorities as output sales tax > input sales tax.

mahdiniaacc
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@littlestart said:

of course, you are right.

thank you

vrushali
Participant
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hi
but i think that the closing debit balance is given and so,
Dr- 9600
Cr-4540+2720+14250=21510
=11910 on Dr..ie closing credit balance

joseph89
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yes I had the same question, I was going to post it…
vrushali is write the answer is 11910. this question is in bpp mock exam 1.
but I can’t understand why when they said that there is a closing DEBIT balance of \$2,720 at the end of the month, they put it on the T account on the credit side?

mahdiniaacc
Member
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@vrushali said:
hi
but i think that the closing debit balance is given and so,
Dr- 9600
Cr-4540+2720+14250=21510
=11910 on Dr..ie closing credit balance

I’m so sorry for my wrong post.
As vrushali said the answer is 11,910
Actually, I didn’t draw the T account for this question and posted my answer just by reading the prior answer. The question said that the closing balance is a debit figure of 2,720 so it means that 2,720 should be account as a credit c/f figure because the b/f is a debit figure.

joseph89
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Quote:
The question said that the closing balance is a debit figure of 2,720 so it means that 2,720 should be account as a credit c/f figure because the b/f is a debit figure.

in more details if it’s possible.
because I thought that when it’s said that closing balance is debit in T account it must be on debit side …

mahdiniaacc
Member
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Please forget temporarily this question and study other questions which say about ” closing balance “. Can you remember any debit closing balance that should be accounted in debit side of account?
I think when a question says ” debit closing balance ” its carried forward should be credit. In fact a closing balance is just a balance so it’s not an entry like carried forward in the accounts’ turnover.
I hope you got what I want to say.

joseph89
Participant
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I had only two of such questions … one is this
but I understood what you want to say. thanks a lot

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