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FA Chapter 12 Questions Sales Tax
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Hi Sir, what does capitalize mean in Question 1?
How much is treated as a non-current asset (have you not watched the earlier lectures?)
Hello, I have a question here. Why is output tax less input tax equal 25,000 Credit correct? I thought it was a debit. The difference figures appear on debit side as a closing balance on Tax Account. let me know the explanation, please. Thanks so much!
The balance is carried forward on the opposite side (as explained in the earlier lectures on double entry bookkeeping). It is a credit balance because they are owing money to the state.
It’s clear now. Thanks so much!
You are welcome 馃檪
I selected 25,000 credit balance of sales tax payable. However, got response that correct answer if Debit 25,000 I am puzzled.
If you are referring to question 2, then you didn’t get that response. Our answer shows the correct answer as being a credit balance and that is correct,
In question number two where did the 120 come from?
The sales include tax at 20%. Therefore for every 100 sales before tax they will add on 20 tax and the price including tax will be 120.
So the tax will be 20/120 of the tax inclusive sales.
If value (Sales or Purchase) is given including tax, to calculate tax you should use formula:
Value x Rate of Tax/100+Rate of Tax = Tax Amount
270000 x 20/120 = 45000
If Allison is not registered for sales tax why are we adding it to the total amount? the last question
The supplier will charge tax whether or not Alison is registered.
my apology for my previous question wasn’t clear , in Q4 why its payable not receivable ???
Because they collected more tax from customers than the tax they suffered, so the difference is owed to the state.