Sales taxes collected from customers are sent to the state 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 in the Sales Tax Payable account. At the end of the month, the amount of sales tax collected is paid to the state and hence, the journal entry would be to debit Sales Taxes Payable and credit Cash. Option A is incorrect because Accounts Receivable is a separate account used to track customer payments on account, while sales taxes are not a part of that. Option B is incorrect because the Sales Tax Payable account is being debited, not credited. Option C is incorrect because Accounts Payable is an account used to track amounts owed to vendors, not to record sales taxes collected.

Sales Taxes Collected from Customers Are Sent to the State