Your Ask Joey ™ Answer

What is the journal entry to record sales tax?

Sales tax is a pass thru activity, which means that the company simply collects the sales tax from the customer and pass it on to the government. When the company sells and item and collects sales tax, the debit would be to cash, and the credits would be to sales revenue and sales tax payable (liability).

The sales tax is recorded as a liability because the company has to remit the cash to the government. When sales tax is remitted to the government, the debit would be to sales tax payable and a credit to cash (cash outflow to pay sales tax).


Back To All Questions

You might also be interested in...

  • How to Write a Research Essay in Accounting

    Writing a research paper will take the student from the start of the process through structuring and mapping your ideas, properly organising your research, exploring writing strategies, and networking- practice that will guarantee the creation of a successful research paper in accounting. No other discipline handling money is as panoramic as accounting for a reason;...

  • Write For Us

    Write For Us Submit your guest blog post! Universal CPA Review welcomes contributors to submit articles for publication on our website. Please review the following guidelines before submitting your article. Due to the high volume of submissions we receive daily, we cannot respond to each one individually. If your article is selected for publication, you...

  • Exams With Essays: How to Prepare Effectively

    “A good essay must have this permanent quality about it; it must draw its curtain round us, but it must be a curtain that shuts us in not out.” Virginia Woolf The essay is the main challenge for students during the exam. When faced with an essay, students most often panic, not knowing how to...