Question

Ashley-Jolie Décor collects 8.35% sales tax on all customer sales. First quarter sales totaled $35,000. The journal entry to record remittance of the sales tax to the proper state taxing authority will do which of the following?

A. Debit sales tax payable and credit cash
b. Debit sales tax expense and credit cash
c. Debit revenue and credit sales tax payable
d. Debit revenue and credit sales tax expense

Answer 1

The journal entry to record the remittance of the sales tax to the proper state taxing authority will be option A: Debit sales tax payable and credit cash.

Step-by-step explanation:

The journal entry to record the remittance of the sales tax to the proper state taxing authority will be option A: Debit sales tax payable and credit cash.

Debit sales tax payable: This increases the liability on the balance sheet, representing the sales tax collected from customers that is yet to be remitted to the state taxing authority.

Credit cash: This represents the cash outflow as the company remits the collected sales tax to the state taxing authority.

This journal entry reflects the obligation to remit the collected sales tax and the corresponding decrease in cash.

When a business collects sales tax from customers, they debit the sales tax payable account to record the liability to the taxing authority. At the same time, they credit the cash account to show that cash has been received from the customers.