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hey john hope you are doing well, i have a doubt which i think most of the students get in question 5.2 why both B/D and C/D fig are on the credit side of the t account.
question: The following information relates to Eva Co’s sales tax for the month of March 20X3:
$
Sales (including sales tax) 109,250
Purchases (net of sales tax) 64,000
Sales tax is charged at a flat rate of 15%. Eva Co’s sales tax account 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 also found out explanation by you back from 2016 same question
your explanation:
To end up with a debit balance means that the total of the debits must be more than the total of the credits.
The balance is the missing figure to make the debit side total the same as the credit side, and so it will be on the credit side.
Suppose there was a debit of 100 and a credit of 10.
The missing figure is 90 on the credit side.
We then put this on the opposite side and end up with a debit balance of 90. We have simply replaced the original figures with the net debit of 90.i didn’t get the last line where you said ” we then put this on the opposite side and end up with debit balance of 90″. did you meant by opening balance of next year
i have watched the lectures but i got confused on this one
Firstly I show how we go about balancing accounts in my lectures working through chapter 3 of our free lecture notes. Most students do not have any problem with that because closing the accounts is not a problem only specific to questions on sales tax. I do suggest you watch those lectures because it would appear that you have not.
Secondly, with regard to the last line, the debit balance of 90 is the closing balance this year which is automatically the opening balance next year.
Finally, it is not necessary to prepare t-accounts in the exam and it is more efficient (and faster) not to.
For this question, at the start of the month they owed 4,540 to the state. During the month they owe the tax on the sales of 15/115 x 109,250 = 14,250. During the month they have suffered tax on the purchases of 64,000 x 15% = 9,600.
Therefore, if they had paid nothing to the state during the month they would would end up owing 4,540 + 14,250 – 9,600 = 9,190.However at the end of the month the state owes them 2,720 (because it is a debit balance) and therefore they must have paid to the state during the month 9,190 + 2,720 = $11,910
yes sir thank you for your help I did watched the lectures twice but was having confusion this particular question. the last part of the question but your explanation helped me thank you sir for helping me out
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