Question

A cash register tape shows cash sales of $ 6900 and sales taxes of $ 345. The journal entry to record this information is

a. Cash 6900
Sales Tax Expense 345
Sales Revenue 7245
b. Cash 7245
Sales Revenue 6900
Sales Taxes Payable 345
c. Cash 7245
Sales Tax Revenue 345
Sales Revenue 6900
d. Cash 6900
Sales Revenue 6900

Answer 1

The correct journal entry to record cash sales and sales tax is to debit Cash for the total amount of sales plus tax and credit Sales Revenue for the sales amount, and credit Sales Taxes Payable for the tax amount.

Step-by-step explanation:

The correct journal entry to record the said transactions, where cash sales amount to $6900 and the sales taxes is $345, would be option b. This option correctly shows the cash received, including the sales tax, and properly allocates the amounts to 'Sales Revenue' and 'Sales Taxes Payable'. The entry to be made in the company's journal would have the 'Cash' account debited by the total amount received (that is cash sales plus sales tax), and the 'Sales Revenue' credited for the amount of the sales alone, while the 'Sales Taxes Payable' would be credited by the amount of sales tax the company needs to remit to a tax authority.

Thus, the entry is as follows:

• Cash 7245
• Sales Revenue 6900
• Sales Taxes Payable 345