A company receives $297, of which $27 is for PST (provincial sales tax). The journal entry to record the sale would include a
A)credit to Sales Tax Expense for $27.
B)credit to Sales Tax Payable for $27.
C)credit to Sales for $297.
D)debit to Cash for $270.

Question

Quizplus · Accepted Answer

The $27 portion of the sale is a liability that the company owes to the government for collecting the PST. Therefore, the journal entry should include a credit to Sales Tax Payable for $27. The other choices are incorrect because Sales Tax Expense is an account used to record the expense of sales tax paid by the company, Sales is the total amount of the sale, and Cash is the amount of money the company received.

A Company Receives $297, of Which $27 Is for PST