Textbook Notes (280,000)
CA (160,000)
UTSC (20,000)
MGA (400)
MGAB01H3 (100)
Chapter

sales tax


Department
Financial Accounting
Course Code
MGAB01H3
Professor
Liang Chen

This preview shows half of the first page. to view the full 1 pages of the document.
Sales tax
Sales Taxes collected on receipts
¾ The GST is a 7% personal consumption tax that is collected on most goods and
services provided in Canada
¾ There are GST exemptions that does not require to be taxed
¾ PST is a single-stage tax collected from final consumers on goods and services
¾ There are few exemptions
¾ GST and PST are excluded from the sales account as it is only collected to be
remitted
¾ The general entry would be: Cash/A.R debited, Sales Credited, GST/PST Payable
Sales returns and allowance
¾ If merchandise is returned, the general entry would be: Sales returns and allowances
debited, GST/PST payable debited, and Cash/A.R credited
Sales taxes paid on disbursements
¾ Businesses pay GST on their purchases, but are able to recover the GST.
Consequently, when merchandise is purchased, the GST paid by a business is not
part of the inventory cost
¾ The GST paid on purchases is debited to an account called GST recoverable and is
called an input tax credit
¾ This input tax credit is used to offset against the GST payable
¾ When GST is collected, the GST recoverable is subtracted from GST payable and the
net difference is remitted or reimbursed
¾ PST on the other hand, is paid only by the final consumer. Therefore, retail
businesses do not have to pay PST on any merchandise purchased for resale
Purchases of Merchandise
¾ Neither GST nor PST forms part of the cost of goods purchased
¾ The entry would be: Merchandise inventory debited, GST recoverable debited, and
A/P credited
Purchase Returns and Allowance
¾ The general entry for this would be: A/P debited, GST recoverable credited, and
Merchandise Inventory credited
Operating Expenses
¾ PST and GST must be paid for many operating expenses
www.notesolution.com
You're Reading a Preview

Unlock to view full version