Sales taxes collected by a retailer are recorded by:

• A. Debiting a revenue account
• B. Crediting a liability account
• C. Crediting an expense account
• D. Debiting a liability account

Answer: (B)

Verified step by step guidance

1. Understand the nature of sales taxes: Sales taxes collected by a retailer are not revenue or expenses for the retailer. Instead, they are amounts collected on behalf of the government and must be remitted to the appropriate tax authority.
2. Identify the correct accounting treatment: Since sales taxes are collected as a liability (an obligation to pay the government), they should be recorded in a liability account, not a revenue or expense account.
3. Determine the correct journal entry: When sales taxes are collected, the retailer should credit (increase) a liability account, such as 'Sales Tax Payable,' to reflect the obligation to remit the taxes.
4. Analyze why other options are incorrect: Debiting a revenue account or crediting an expense account would misrepresent the nature of sales taxes, as they are neither income nor expenses for the retailer.
5. Conclude the correct answer: The correct accounting treatment is to credit a liability account, such as 'Sales Tax Payable,' when sales taxes are collected.