Sales taxes collected from customers are sent to the state government at the end of each month.What journal entry is prepared?
A)debit Accounts Receivable and credit Sales
B)debit Sales Tax Payable and credit Sales
C)debit Accounts Payable and credit Cash
D)debit Sales Taxes Payable and credit Cash

Question

Quizplus · Accepted Answer

When sales taxes are collected, they are recorded as a liability in the Sales Taxes Payable account until they are remitted to the state government. At the end of the month, the sales taxes collected from customers are sent to the state government, reducing the balance in the Sales Taxes Payable account. The entry would be to debit Sales Taxes Payable (reducing the liability) and credit Cash (reducing the asset).

Sales Taxes Collected from Customers Are Sent to the State