chapter 6.3 & 6.4
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Chapter 6.3 & 6.4. Sales Taxes. Sales Taxes. Tax dollars generated from business transactions. Four basic taxation principles will help you understand the accounting required:. Tax dollars are charged to the buyer of goods - PowerPoint PPT PresentationTRANSCRIPT
Chapter 6.3 & 6.4Sales Taxes
Sales Taxes Tax dollars generated from business
transactions
Four basic taxation principles will help you understand the accounting required:
1. Tax dollars are charged to the buyer of goods
2. The tax dollars are collected by the seller and recorded in a separate liability account
3. The tax dollars rightfully belong to the government
4. The seller sends the tax dollars to the government at appoint times
Retail Sales Tax (Provincial Sales Tax)
in Canada is commonly called Provincial Sales Tax (PST) because it is a tax charged by some provincial governments. The tax is calculated as a percentage of the price of a good and is paid by the consumer
PST + GST = HSTWhat is it?
What is it? Harmonized sales Tax- 13%, July 1,
2010 Percentage tax based on price of
goods/ services sold to consumer Used by government to collect revenue
to spend on services 2008 PST: 8%, GST: 5%
Accounting for HST: The Seller or Vendor – is responsible for
administering the HST and remitting it to the Federal Government, which includes:› Calculating the taxes (PST & GST) +
adding it into the price of goods / services› Collecting tax from customers + remitting
(to pay) to levels of government
Sales Transactions: Bank (cash sales) or A/R Sales
Invoice› Revenue› HST Payable (13%) liability
account to accumulate tax.
The Purchaser: Is responsible for accounting for HST
on purchases related to the operations of the business and by submitting the Input Tax Credit for the appropriate refund
Purchase Transaction“Contra liability” account used to recover taxes paid on purchases for operating business complete “input tax credit” for refund of HST (DR)
Assets/ Expense HST Recoverable
› Bank or A/P
Cheque Copy
Purchase Invoice
Remitting Harmonized Sales Tax:
Small business pays (remits) annually Mid-size business remits quarterly (3
months) Large business remits by the 15th the
following month
Sales to Customer Tax Paid on Purchase
131313
13133
926
Remittance HST Payable – Recoverable
= 39 – 26 = 13
HST RECOVERABLE
HST PAYABLE
Journal EntryDR CR
HST Payable 39HST Recoverable 26Cash 13
To record HST Remittance
Sales to Customer Tax Paid on Purchase
1313
131313
26
39
Refund HST Recoverable > Payable = 39 – 26 = 13
HST RECOVERABLE
HST PAYABLE
Journal EntryDR CR
HST Payable 26Cash 13
HST Recoverable 39To record HST Refund