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sir, I am not able to get the reasoning behind why sales tax is been deducted while calculating the closing capital. because I think we don’t calculate the tax on personal expenses(not relating to business).
is it because it was not included in the $400.
The telephone bill will have included sales tax of 17.5% x $400 = $70.
If the bill had been for the business, then the business could get the $70 back from the state, which is why he has only put $400 in the SOPL.
However it was not for the business it was for himself. Therefore the business will not get $70 back from the state and it is charged to drawing (along with the $400), and this reduces the capital.
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