The difference between income tax and sales tax lies in the fact that the income tax targets the activity of the individual or the company, while the sales tax targets the goods and services sold, the burden of which is transferred from one seller to another until it is borne by the final consumer.
Method of recording sales tax entries
Some countries impose on companies of all kinds a sales tax on the goods and services sold. When the company buys goods from a seller registered in the tax, it will pay him the value of the goods in addition to the value of the tax due on the goods. When the company sells goods to another buyer according to a tax invoice, it will get from him a The value of the goods in addition to the tax value, and the difference between the tax paid on purchases and the tax collected on sales, is supplied to the tax officer during a specific financial period, as follows:
Some countries impose on companies of all kinds a sales tax on the goods and services sold. When the company buys goods from a seller registered in the tax, it will pay him the value of the goods in addition to the value of the tax due on the goods. When the company sells goods to another buyer according to a tax invoice, it will get from him a The value of the goods in addition to the tax value, and the difference between the tax paid on purchases and the tax collected on sales, is supplied to the tax officer during a specific financial period, as follows:
Example
The sales invoices of Al Farah Trading Company during the month of 1/2017 amounted to $10,000 before tax, and the purchase invoices during the same period amounted to $8,000 before tax,
On 02/10/2017, the company paid the tax due for the month of 1/2017 to the tax department, so if you know that the sales tax rate on the sale of goods is 10%.
Required :
Registration of purchase and sale restrictions.
Recording the payment of the sales tax due to the tax department
Solution method:
First: Registration of tax sales entries:
Value of tax due on sales = value of sales before tax x tax rate
10,000 * 10% = $1,000
So the value of the amounts received in cash from sales = 10,000 + 1,000, equal to $11,000
Registration of purchase and sale restrictions.
Recording the payment of the sales tax due to the tax department
Solution method:
First: Registration of tax sales entries:
Value of tax due on sales = value of sales before tax x tax rate
10,000 * 10% = $1,000
So the value of the amounts received in cash from sales = 10,000 + 1,000, equal to $11,000
Second: Registration of Tax Purchases Restrictions:
Value of tax due on purchases = value of purchases before tax x tax rate
8000 * 10% = $800
So the value of the amounts paid in cash for purchases = 8000 + 800, equal to 8800 $
Third: Paying the tax due to the tax department:
After registering the two previous entries, the balance of the sales tax due account will appear in the amount of $200 (1000 - 800 = $200), and when this amount is paid to the tax department, the following entry will be recorded:
After registering the two previous entries, the balance of the sales tax due account will appear in the amount of $200 (1000 - 800 = $200), and when this amount is paid to the tax department, the following entry will be recorded:
Add New Comment