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If there is a sales tax rate of 8.25% and a company collected $84,435 from customers,...

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?

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Answer #1

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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