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SALES TAX

This topic has 3 replies, 2 voices, and was last updated 6 years ago by Chris.

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January 22, 2018 at 11:53 am #432038
suleymanabuzerli
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Business commenced with capital in cash of 1000$.Inventory costing 800$ plus sales tax is purchased in cash,and half is sold for 1000$ plus sales tax ,the customer paying in cash at once.The sales tax rate is 20%.
What would the accounting equation after these transactions?
Assets
?
Liabilites
?
Capital
?
January 22, 2018 at 12:02 pm #432041
Chris
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The journal entries required would be:
DR Cash 1000
CR Share capital 1000
DR Inventory 800
DR Sales tax recoverable/receivable 160
CR Cash 960
DR Cash 1200
CR Revenue 1000
CR Sales tax recoverable/receivable 200
DR Cost of sales 400
CR Inventory 400
Now try working out the net effect of these and you should get your answer.
January 22, 2018 at 12:48 pm #432058
suleymanabuzerli
Member
- Topics: 84
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yes,but l utilize this method,liability is 0 but tax liability should be 40$ ( 200-160=40)
January 22, 2018 at 6:12 pm #432133
Chris
Member
- Topics: 7
- Replies: 600
Perhaps the solution to the question considers the tax liability to have been paid with a further journal of
DR Sales tax recoverable/receivable 40
CR Cash 40
Where are you getting this question from?
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