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sir, if we have
receivables 575
sales 500
saes tax 75, what receivable value should we have to put in current asset? inclusive of sales tax or exclusive?Receivables should be inclusive of sales tax.
In this situation we are making a sale of 500 on which sales tax of 75 is charged. The person who is buying (i.e our Receivable) would need to pay us 500 for the good and also he would have to bare the tax of 75 as well.
For us, the sales value is only 500 and 75 tax we are collecting would be paid to the tax authority.∴The double entry would be:
..Receivables – Dr 575
…… Sale…………. – Cr 500
…… Sales tax…… – Cr 75Nissan’s answer is correct.
575 will appear as a receivable in the SOFP; 75 will appear as a current liability in the SOFP (assuming it has not been paid yet to the state).
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