If there is a sales tax rate of 8.25% and a company collected $84,435 from customers, they will debit cash, credit sales revenue, and what other account will they credit?
Journal Entry will be as follows:
Cash | Dr | 84,435 | |
Sales | Cr | 78,000 | |
Sales Tax Payable | Cr | 6,435 |
The other account that will be credited as asked in Question is Sales Tax Payable A/c.
Total amount of $84,435 received from customers is inclusive of 8.25% Sales Tax. Revenue will be booked only at net amount.
Thus revenue amount is = 84,435 * 100 / 108.25 = $78,000
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