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Hello
The question is from F3 BPP REVISION KIT.
Topic: Sales tax
Question no. 5.2The following information relates to EVA Co’s sales tax for month of March 20X3:
Sales (including sales tax) $109,250
Purchases (net of sales tax) $64,000Sales tax is charged at a flat rate of 15%. Eva Co’s sales tax accounts showed an opening credit balance of $4,540 at the beginning of the month and a closing debit balance of $2,720 at the end of the month.
What was the total sales tax paid to regulatory authorities during the month of march 20X3?
( I have looked at the solution and what confused me is that there is a posting of c/d $2,720 on the credit side of the T account, where as it clearly says “a closing debit balance of $2,720 at the end of the month.” in the question.
Can somebody please explain to me conceptually why was the c/d balance posted on credit side. THANK YOU)
You really need to watch my free lectures on double entry bookkeeping.
When we carry down a balance, it is always carried down on to the opposite side.
Think about it, if you have a debit of 1,000 and a credit of 800, then the net result is a debit of 200. We complete the account by putting 200 on the credit side to make it balance, and then carry forward the 200 to the debit side.
My lectures are a complete free course for Paper F3 and cover everything needed to be able to pass the exam well.
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