Sales taxes collected by a company on behalf of the state and local government are recorded by:
A)A debit to an expense account.
B)A credit to a revenue account.
C)A debit to a revenue account.
D)A credit to a liability account.

Question

Quizplus · Accepted Answer

Sales taxes collected by a company on behalf of the state and local government are a liability until they are remitted to the appropriate government agency. Therefore, the correct entry is a credit to a liability account.

Sales Taxes Collected by a Company on Behalf of the State