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SALES TAX

Forums › ACCA Forums › ACCA FA Financial Accounting Forums › SALES TAX

  • This topic has 3 replies, 2 voices, and was last updated 7 years ago by Chris.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • January 22, 2018 at 11:53 am #432038
    suleymanabuzerli
    Member
    • Topics: 84
    • Replies: 32
    • ☆☆

    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
    Member
    • Topics: 7
    • Replies: 600
    • ☆☆☆☆

    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
    • Replies: 32
    • ☆☆

    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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    Posts
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