When would a company record sales tax expense on a purchase?
If you are a customer and purchase goods from a company, then you will likely be charged sales tax (there are some items exempt from sales tax). In this case, you should record sales tax.
For example, if you go to a bar and buy glass of wine, you might be charged sales tax. As you can see, when you go to record your purchase, part of the cost would be debited to sales tax expense.
If you are the company providing the good or service, you would not recognize any sales tax expense in your income statement. Only the a buyer of goods or services records sales tax.
You might also be interested in...
Are you looking for a CPA review course?
Universal CPA Review is the only CPA review course that has explanation videos for every single multiple choice question. These videos focus on helping identify the big picture and developing a systematic approach to tackling the concept. Our content creators are masters of their craft. They know what it takes to pass the exam and […]
How is audit risk impacted with changes in the assessment of inherent risk, control risk, and detection risk?
Audit risk is the combination of inherent risk, control risk, and detection risk. Remember, the audit team will “assess” inherent risk and control risk. Based on the assessment, then audit team will set detection risk, which ultimately impacts the amount of substantive procedures that must be performed. So in the visual below, you can see […]
Scores Came Out: I Just Got a 73% on Audit, Now What?
Yesterday morning a student interested in trying Universal CPA Review reached out and expressed concern with the fact that they just took audit for the fourth time and scored a 73%. Audit is a lot of candidate’s “kryptonite” and the reason is because it is sort of like skiing. Easy to learn, extremely hard to […]