Enhance Your Accounting and Tax Operations with Sales Performance Automation

How to create outlook signature

what are going to be looking at here our sales tax is payable and we're going to have to set up an adjusting entry here to record the sales tax now retailers must collect sales tax from the customers on sales made and then remit the tax here to the proper governmental authority but they must set up here a liability account to provide for the taxes collected from the customers but not yet remitted to the governmental authority here now many companies do not segregate out sales tax on the amount of sales at the time of the sales to reflect correctly the actual amount of sales in the liability for the sales tax at the reporting period you're going to be debiting a sales account here for the sales taxes due and you're going to be crediting a sales tax payable for that same amount so let's look at our example here during the month year September's a sporting goods store had cash sales here five hundred thirty thousand dollars in credit sales here of three hundred seven thousand four hundred dollars both of which included a sales tax of six percent and that must be remitted to the state government here by October 15 so the first thing we have to do is we have to calculate the sales tax so we have the sales plus the sales tax here that was that five hundred and thirty thousand dollar a cash sale plus the three hundred and seven thousand four hundred dollar credit sales total amount here is eight hundred and thirty seven thousand four hundred dollars so the key here is you have to be determine your total sales here now we have to determine our sales exclusive of the tax here so this is the key that we have to do here we take our total sales here of eight at eight hundred thirty seven thousand four hundred dollars and we divide it by here one plus the tax rate so our sales tax here was six percent so one plus the tax rate would be 1.0 six divide that into your total sales here of eight hundred thirty seven thousand four hundred dollars and you're going to come up with seven hundred and ninety thousand dollars now that's our sales and that is the amount that exclusive of the tax that our taxes and included here so just taking the total sales here eight hundred thirty seven thousand four hundred less your sales here exclusive of the tax 790,000 gives you our sales tax here six percent of forty-seven thousand four hundred dollars okay now let's go and look at how we would record it here at this fine our financial statements here at the end of the month year of the end of September here remember two taxes is due in our October fifteenth but we're going to have a financial statement here doing at the end of September here in 930 so what we have to do is we have to set up two main accounts here we are going to have to set up a current liability account here as a sales tax payable and I've got it listed here for September here and that's on our balance sheet and then we're gonna have this revenue account here that's the sales revenue again we're looking at it here for September and this is on our income statement okay so let's start with our sales revenue here in it to record our sales revenue here we'd be crediting it here for that total amount here of our sales eight hundred thirty-seven thousand four hundred dollars and then the debit amount let's just go over here it would be debited to occur an asset account here cash or accounts receivable for the sales here of eight hundred thirty-seven thousand four hundred dollars here and remember that's F nine thirty here this at the reporting date for our financial statements okay so let's go back to our we look at our sales revenue here remember we credited that here for eight hundred the total amount of sales eight hundred thirty-seven thousand four hundred dollars nine thirty here then we have to set up this current liability those are the sales tax payable here again at the reporting date nine thirty here we would credit that here for the sales tax that we calculate our forty seven thousand four hundred dollars and then for the sales right we would on our Inc that's on our balance sheet here and then on our income statement our sales revenue account we would be reducing that by forty we reduce it by the amount of the sales tax here forty seven thousand four hundred dollars so our sales revenue would be exclusive of the tax year since we would have debited by that amount here so and then again that's at 9:30 here so we would credit your sales tax payable debit your sales revenue before sales tax here and remember again that's just that's our sales tax here so to separate our to reduce our sales here by the amount of that sales tax and then when we have to send the tax to the state here on 1015 we would simply take our sales tax payable which is a current liability here on our balance sheet and reduce it by the amount of the sales tax payable here forty seven thousand four hundred dollars or debited for that amount here so and then the crediting amount would go to cash here since we have to pay it out in cash so this four forty seven thousand four hundred dollars again cash on our balance sheet here the sales tax payable as a current liability on our balance sheet here and this is this crediting our cashier and debiting our sales tax payable that's when we send the text of the state here so just going back and reviewing this again here just the important point here to determine the sales tax here that was do you just take your total sales here since the total sales included the sales tax your n divided by one plus the tax right that's the key here that's going to give your sales with less the sales tax here and then you can simply just take out your I subtract the difference here between your sales with the sales tax less the sales without the tax is going to give your your sales tax for the period and then just remember you have to go down here and you have to set up this current liability account here for the sales tax payable at that time here and then you'd also set up your sales revenue here at that time for the in this case the total sales that we've made and then when M if the time here that your reporting period here you would reduce your sales revenue by the amount of that sales tax and that debit amount here for your sales revenue would go into your sales tax payable here as your current liability and then again when you pay it off just reduce your debit out and cancel out your sales tax payable by that amount here and then you'd have to pay the cashier yeah by that amount here and send it to the state here for the same tax due all right so that just takes care of how you would record here an adjusting entry here to record your sales tax here at the end of the period that you're reporting for your financial statement