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Sales tax

This topic has 3 replies, 2 voices, and was last updated 10 years ago by Nishan.

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November 9, 2014 at 2:01 am #208509
Shanda
Member
- Topics: 46
- Replies: 44
At 1 December 2012, Laurel owed sales tax to the state of $23,778.
During the month of December she had the following transactions:
-sales of $800,000 exclusive of 17.5 % sales tax
-purchase of $590,790 inclusive of 17.5% sales tax.
During December she has paid no tax to the state.
How much did Laurel owe to the state for sales tax at the end of December?
Can I see the method of calculation please?
November 9, 2014 at 12:43 pm #208564
Nishan
Participant
- Topics: 5
- Replies: 50
Output tax for December:
800,000 x 0.175 = 140,000
Input tax for December:
590,790 x 17.5/117.5 = 87,990
Tax payable for December: Output – Input tax
140,000 – 87,990 = 52,010
Total Payable at the end of December: Opening Payable + December Payable
∴ 23,778 + 52010 = 75,788
If we draw up a T account, it will be like this:
November 11, 2014 at 12:36 am #208940
Shanda
Member
- Topics: 46
- Replies: 44
for input sales tax why must you divide by 117.5?
November 11, 2014 at 6:37 am #208957
Nishan
Participant
- Topics: 5
- Replies: 50
The purchase amount of 590,790 given is inclusive of sales tax right..
So we can apply this method of calculation below for input tax:

To calculate the output tax which is given as exclusive of sales tax, the same method is applied like this:

Hope that helps 🙂
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