Question

5. A business in its first period of trading charges $4,000 of sales tax on its sales and suffers $3,500 of sales tax on its purchases which includes $250 irrecoverable sales tax on business entertaining. Prepare the sales tax control account.

Answer 1

The unrecoverable sales tax on business entertaining ($250) has been deducted from $3,500

solution

                                   SALES TAX CONTROL ACCOUNT

Payable s                                             $ 3250        Receivables       $4000

Balance c/d (owned to tax authority)   $ 750

                                                           -------------                                ---------------

                                                             $ 4000                                    $4000

                                                           --------------                               ----------------

                                                                              By balance b/d       $ 750