Part D RECORDING TRANSACTIONS AND EVENTS Part D Chapter 7: Sales tax Chapter 8: Inventory Chapter 9: Tangible non-current assets Chapter 10: Intangible non-current assets Chapter 11: Accruals and prepayments Chapter 12: Irrecoverable debts and allowances Chapter 13: Provisions and contingencies Chapter SALES TAX Learning Objectives The nature of a sales tax and how it is collected Accounting for a sales tax The nature of a sales tax and how it is collected Administered by tax authorities Output sales tax Sales tax charged by the business on goods/services Sales tax Is an indirect tax levied on the sale of goods and services Can have a number of rates, e.g standard rate, reduced rate Greater than input? Pay difference to tax authorities Greater than output? Refund due to business Input sales tax Sales tax on purchases made by the business Accounting for a sales tax (a) Credit Sales (b) Credit Purchase i Include sales tax in sales day book; analyse it separately ii Include gross receipts from receivables in cashbook; no need to show sales tax separately iii Exclude sales tax element from income statement iv Credit sales tax payable with output sales tax element of sales invoices i Include sales tax in purchases day book; analyse it separately ii Include gross payments in cashbook; no need to show sales tax separately iii Exclude recoverable sales tax from income statement iv Include irrecoverable sales tax in income statement v Debit sales tax payable with recoverable input sales tax element of credit purchases Accounting for a sales tax (c) Cash Sales (d) Cash Purchase i Include gross receipts in cashbook; show sales tax separately ii Exclude sales tax element from income statement iii Credit sales tax payable with output sales tax element of cash sales i Include gross payments in cashbook; show sales tax separately ii Exclude recoverable sales tax from income statement iii Include irrecoverable sales tax in income statement iv Debit sales tax payable with recoverable input sales tax element of cash purchases ... allowances Chapter 13: Provisions and contingencies Chapter SALES TAX Learning Objectives The nature of a sales tax and how it is collected Accounting for a sales tax The nature of a sales tax and...Part D Chapter 7: Sales tax Chapter 8: Inventory Chapter 9: Tangible non-current assets Chapter 10: Intangible non-current assets Chapter 11: Accruals and prepayments Chapter 12: Irrecoverable... sales tax separately iii Exclude recoverable sales tax from income statement iv Include irrecoverable sales tax in income statement v Debit sales tax payable with recoverable input sales tax element