Question

5. A business in its first period of trading charges $4,000 of sales tax on its sales and suffers $3,500 of sales tax on its purchases which includes $250 irrecoverable sales tax on business entertaining. Prepare the sales tax control account.

Answer 1

The unrecoverable sales tax on business entertaining ($250) has been deducted from $3,500

solution

SALES TAX CONTROL ACCOUNT

Payable s $ 3250 Receivables $4000

Balance c/d (owned to tax authority) $ 750

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$ 4000 $4000

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By balance b/d $ 750