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the following transactions took place during Alan’s first month of trading:
Credit sales of $121,000 exclusive of sales tax
Credit purchases of $157,110 inclusive of sales tax
Cash payments to credit suppliers of $82,710 inclusive of sales tax
All transactions are subject to sales tax at 20%.
What was the balance on Alan’s sales tax account at the end of his first month of trading?
A $1,985 DR
B $1,985 CR
C $15,770 DR
D $15,770 CRanswer is A
why cash payments to credit suppliers inclusive of sales tax excluded in the answer
The sales tax is included on the invoices received from suppliers.
There is no extra sales tax involved when we pay the suppliers.
Do watch my free lectures on sales tax. The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.
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