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The following information relates to Eva Co’s sales tax for the month of March 20X3:
Sales (including sales tax) 109250$
Purchases (net of sales tax) 64000$Sales tax is charged at a flat rate of 15%. Eva CO’s sales tax account showed an opening credit balance of 4540$ at the beginning of the month and a closing debit balance of 2720$ at the end of the month.
What was the total sales tax paid to regulatory authorities during the month of March 20X3?
$__________Can anyone solve the above question for me?
Thanks,
Have you watched my free lectures on sales tax? The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.
I do follow your lectures sir. They are quite helpful, but this is the only question I can’t tackle in sales tax. I solved all the other questions of sales tax correctly. Can you help me with this one? I have found the answer as well,but it does not match to the book answer. Can you give me your answer for this question? I want to confirm that my answer is right. I reckon the book is wrong.
Hi!
Can anyone hear me?
Is anyone there?
Hello!
This seems scary to me.
Where are you?If you want me to answer you should ask in the Ask the Tutor Forum. This forum is for students to help each other.
There is a credit balance brought forward on the sales tax account of 4,540.
The tax on sales is 14,250 and this is credited to the account.
The tax on purchases is 9,600 and this is debited to the account.
Given that they end up with a debit balance of 2,720, this amount must have been carried forward from the credit side of the sales tax account.
The missing figure to make the account balance is 11,910 on the debit side, and this must be the amount paid to the authorities.
Ok! I will ask in ask the tutor form from now on.
Why does 2720 appear on the credit side when the question clearly says that the closing balance is on the debit side? I learned in FA1 that Closing balance , balance carried down and balance carried forward are all equal.Doesn’t closing debit balance mean that the closing balance is on the debit side?
I put the closing balance on the debit side and the answer was different.
Balances are always carried down to the opposite side of the t-accounts.
So if the missing figure on the t-account is on the credit side then it means that the debits must total more than the credits. So the missing figure is then carried forward as a debit balance.
I explain all this in my free lectures on double entry bookkeeping (and the ‘rule’ as to how to close off accounts is the same as for FA1 and for all double entry bookkeeping).
Yes sir. I watched your video on balancing accounts. I know balance carried down is carried forward to the opposite side of the T account, but my confusion here is that what do they mean by the closing balance? Does closing balance mean the opening balance of next year(balance b/f)?
I also answered the following question incorrectly because of this confusion:
An accountant has inserted all the relevant figures into the trade receivables account, but has not yet balanced off the account.
TRADE RECEIVABLES ACCOUNT
Balance b/d 100,750 Cash at bank 250225
Sales 325Assuming there are no other entries to be made ,other than to balance off the account, what is the closing balance on the trade receivables account?
A. $425,760 DR
B. $175,535 DR
C. $425760 CR
D. $175,535 CRMy answer was D ,but book says B is right. Why? My answer is correct in amount ,but wrong in side. In this question, balance c/d is on the credit side. Right?? So, that should be the closing balance, because closing balance and balance c/d are equal. So the closing balance or balance c/d should be on the credit side,not debit.
Need help!!!
John Moffat wrote:Balances are always carried down to the opposite side of the t-accounts.
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