Lesson 1 & 2

Sales Tax Payable has a normal credit balance.

• True
• False

Regardless of when payment is received, the revenue should be recorded when a sale is made, not on the date cash is received.

• True
• False

The amount of sales tax collected is a liability of a business until paid to the government.

• True
• False

When merchandise is sold on account and sales tax is also collected,

• Accounts Receivable is credited for the total sale and sales tax.
• the Accounts Receivable balance is increased.
• Sales is debited for the price of the goods.
• the sales tax is not reported.

Marris Company records a $1,000.00 sale on account on May 23. On June 6, the customer pays the account. The sale should be recorded in the

• sales journal on May 23.
• cash receipts journal on May 23.
• sales journal on June 6.
• cash receipts journal on June 6.

The amount of sales tax on a sale is calculated as the price of goods

• plus the sales tax rate.
• times the sales tax rate.
• minus the sales tax rate.
• divided by the sales tax rate.

A business should post sales on account transactions to the accounts receivable subsidiary ledger frequently to

• ensure the customer is invoiced for the sale.
• avoid errors in posting.
• follow generally accepted accounting principles.
• ensure each customer account will show an up-to-date balance.

The amount of cash received for a sale on account of $1,080.00 when the cash is received within the 2% discount period is

• $1,080.00
• $1,062.00.
• $1,058.40.
• $1,053.60.