The sales tax paid by you is NOT an expense account. It is a balance sheet
item (asset) that can be settled against the sales tax received by you that
you have to hand over to the tax man every month/quarter/year. To simlify
it, just think of TWO invoices. You buy a computer for 100$ including 20%
tax, then sell it for 200$ including 20% tax.
Sales tax on the buy (AP ledger, you will pay the factory normally) is 20$.
The sale goes either cash or on account, which will be AR (you want to
receive the money) .
The tax man will want to receive 40, but you can deduct the 20 you paid
yourself.
Effectively, Tax has been taken over the VA part (Value added) of 200 minus
100 thta way.
2009/3/28 Stuart Luppescu <sl...@cc...>
> Hello, I've been muddling along with just one sales tax account for a
> long time, but I've decided I should do it right, with one account for
> sales tax paid, and one account for sales tax collected.
>
> I'm not sure that I'm classifying these accounts correctly. The sales
> tax collected account (for tax on retail sales) is AR_tax, AP_tax,
> IC_taxpart, and IC_taxservice. It's a liability account. Sale tax paid
> is AP_tax, IC_taxpart, and IC_taxservice, and it's an expense account.
>
> Does this seem correct? I'd appreciate some guidance. I'm worried that
> when we do purchases, both taxes will be calculated; or when we sell
> something, the sale tax paid will be calculated; or something else
> screwy will happen. How can I prevent this kind of mistakes?
>
> Thanks.
>
> --
> Stuart Luppescu -=- s-luppescu .at. uchicago.edu
> University of Chicago (^_^)/ CCSR
> 才文と智奈美の父 -=-=- Kernel 2.6.25-gentoo-r
> What an author likes to write most is his
> signature on the back of a cheque. -- Brendan
> Francis
>
>
>
>
>
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