Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 11: 3RQ (page 603)

How is sales tax recorded? Is it considered an expense of a business? Why or why not?

Short Answer

Expert verified

No, sales tax is not considered an expense of a business.

Step by step solution

01

Meaning of Sales tax

Sales tax payable is a liability that must typically be settled within a year after collection. Therefore, it falls under the category of current or short-term liabilities. As a result, the outstanding sum is shown on the balance sheet under current liabilities.

02

Explanation of sales tax is an expense of business or not

No, sales tax is not an expense to the company but a current liability. The company collects the customers' sales tax and sends it regularly to the state. Usually, they submit it every month, but sometimes the company pays it frequently to the state, depending on the state and the amount of the tax.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

What payroll taxes is the employer responsible for paying?

Lucy Rose works at College of Fort Worth and is paid $12 per hour for a 40-hour workweek and time-and-a-half for hours above 40.

Requirements

1. Compute Rose’s gross pay for working 60 hours during the first week of February.

2. Rose is single, and her income tax withholding is 15% of total pay. Rose’s only payroll deductions are payroll taxes. Compute Rose’s net (take-home) pay for the week. Assume Rose’s earnings to date are less than the OASDI limit.

3. Journalize the accrual of wages expense and the payment related to the employment of Lucy Rose.

Lily Carter works for JDK all year and earns a monthly salary of \(12,100. There is no overtime pay. Lily’s income tax withholding rate is 10% of gross pay. In addition to payroll taxes, Lily elects to contribute 5% monthly to United Way. JDK also deducts \)250 monthly for co-payment of the health insurance premium. As of September 30, Lily had $108,900 of cumulative earnings. Requirements

1. Compute Lily’s net pay for October.

2. Journalize the accrual of salaries expense and the payment related to the employment of Lily Carter.

Curtis Company is facing a potential lawsuit. Curtis’s lawyers think that it is reasonably possible that it will lose the lawsuit. How should Curtis report this lawsuit?

Coltrane Company has a \(5,000 note payable that is paid in \)1,000 instalments over five years. How would the portion that must be paid within the next year be reported on the balance sheet?
See all solutions

Recommended explanations on Business Studies Textbooks

Business Operations

Read Explanation

Managerial Economics

Read Explanation

Organizational Communication

Read Explanation

Introduction to Business

Read Explanation

Change Management

Read Explanation

Business Development

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free