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calculating sales tax

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › calculating sales tax

  • This topic has 3 replies, 2 voices, and was last updated 10 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • June 22, 2014 at 8:20 pm #177425
    daniel
    Participant
    • Topics: 9
    • Replies: 7
    • ☆

    dear mr tutor,
    i am struggling to solve this question,your hand would be much appreciated.the question goes;
    If sales tax (including sales tax) amounted to $27 612.50, and purchases(excluding sales tax) amounted to $18000, the balance on sales tax account ,assuming all items are subject to sales tax at 17.5%, would be ? please include amount and entry.

    i tried to solve this question by calculating difference in sales tax included (i.e sales and purchases ) but the answer in the book is different,i dont understand how i am expected to approve such a question.help please

    June 23, 2014 at 9:40 am #177445
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54680
    • ☆☆☆☆☆

    If sales including sales tax are 27612.50, then the sale tax included is 0.175/1.175 x 27612.50 = 4112.50

    If purchases excluding sales tax are 18,000, then the sales tax will be 17.5% x 18,000 = 3150.00.

    So the net amount owing to the state is 4112.50 – 3150.00 = $962.50

    (I will give you the entries, but they are really not needed – there is very little actual double entry asked for in the exam! Computers do the double entry in real life – what the exam tests is what the accountant is needed for – to sort out the amounts involved.

    For the sales:

    Dr Receivables 27612.50
    Cr Sales 23500.00
    Cr Sales Tax 4112.50

    For the purchases:

    Dr Purchases 18000.00
    Dr Sales Tax 3150.00
    Cr Payables 21150.00

    June 23, 2014 at 7:42 pm #177498
    daniel
    Participant
    • Topics: 9
    • Replies: 7
    • ☆

    Thanks

    June 23, 2014 at 9:16 pm #177502
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54680
    • ☆☆☆☆☆

    You are welcome 🙂

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    Posts
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