When a company collects sales tax from a customer,the event is recorded by:
A)A debit to Sales Tax Expense and a credit to Sales Tax Payable.
B)A debit to Cash and a credit to Sales Tax Payable.
C)A debit to Sales Tax Payable and a credit to Sales Tax Expense.
D)A debit to Sales Tax Payable and a credit to Cash.

Question

Quizplus · Accepted Answer

When a company collects sales tax from a customer, the cash received is debited and the sales tax payable account is credited. This is because the company now owes the collected sales tax to the government but has not yet paid it. Option A is incorrect because Sales Tax Expense would only be debited when the company pays the sales tax owed. Option C is incorrect because it incorrectly records the sales tax as an expense rather than a liability. Option D is incorrect because it credits cash when cash is received, not debited.

When a Company Collects Sales Tax from a Customer,the Event