Sales Tax Payable definitions Flashcards
Sales Tax Payable definitions
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Sales Tax A percentage-based amount added to sales price, collected from customers and remitted to the government by the company. Sales Tax Payable A liability account representing sales tax collected from customers but not yet remitted to the government. Revenue The portion of cash collected from sales that belongs to the company, excluding any sales tax. Liability An obligation to pay an amount, such as collected sales tax, to another party, typically the government. Journal Entry An accounting record that documents the debit and credit effects of a transaction, such as sales and tax collection. Cash Receipts The total amount of cash collected from customers, including both sales revenue and sales tax. Remittance The process of sending collected sales tax from the company to the government, settling the liability. Sales Tax Rate The percentage applied to sales to determine the amount of sales tax to be collected. Reconciliation The process of determining sales revenue and sales tax payable from total cash receipts, often at month-end. Debit An accounting entry that increases assets or decreases liabilities, such as recording cash collected. Credit An accounting entry that increases liabilities or revenue, such as recording sales tax payable or sales revenue. Total Cash Collected The sum of sales revenue and sales tax received from customers during a period. Formula for Sales Revenue A calculation dividing total cash receipts by 1 plus the sales tax rate to determine actual sales revenue. Retained Earnings The equity account increased by revenue earned, not including sales tax collected. Accounts Receivable An asset account for sales made on credit, not directly involved when all sales are cash.
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