324 Sales Tax Payable

Liabilities

Accrued

Synopsis

Account 324 is established to record the amount of Sales Tax payable or accrued.

Debits

Credits

  1. Net payments made

  2. Revenue for collecting sales taxes

 

  1. Sales tax collected

  2. Use taxes payable

Example 1

Record the use tax of $375 on the purchase of furniture from out of state in the amount of $7,875.

Journal: Cash Disbursements and Purchase

Entry:

 

Debit

Credit

Account 284

Furniture & Fixtures

$7,875

 

Account 202

Cash in Bank

 

$7,500

Account 324

Sales Taxes Payable

 

$375

Example 2

Record a customer cash sale of $618 on a repair order for mechanical labor and parts. The customer labor sale is $340 and the parts sale is $250. The sales tax is $13 and the shop supplies are $15. The cost of labor is $100 and cost of the parts is $80.

Journal: Service Sales - Cash

Entry:

 

Debit

Credit

Account 225

Cash Sales

$618

 

Account 660A

Cost of Sales – Customer Labor – Cars & Light Duty Trucks

$100

 

Account 667

Cost of Sales – Parts Mechanical Repair Orders & Light Duty Trucks

$80

 

Account 242

Inventory – Parts & Accessories

 

$80

Account 247A

Inventory – Work in Process – Mechanical

 

$100

Account 324

Sales Taxes Payable

 

$13

Account 460A

Sales – Customer Labor – Cars & Light Duty Trucks

 

$340

Account 467

Sales – Parts Mechanical Repair Orders & Light Duty Trucks

 

$250

Account 61-05

Other Supplies

 

$15

Example 3

Record the payment of $19,365 for sales taxes collected for the month.

Journal: Cash Disbursements

Entry:

 

Debit

Credit

Account 324

Sales Taxes Payable

$19,365

 

Account 202

Cash in Bank

 

$19,171

Account 905

Other Income

 

$194

Comments

A credit balance represents unpaid sales and use taxes. 

Note:

If applicable, federal excise tax and luxury tax can be handled through separate general ledger sub-accounts, 324A Sales Tax Payable - Excise Taxes and 324B Sales Tax Payable - Luxury Taxes.  At month-end, these sub-accounts should be combined and shown with Account 324, Sales Taxes payable on the trial balance and operating report.

Transactions, which are related, should be recorded in separate sub-accounts.  Sub-accounts serve to keep records organized for future analysis and auditing.  The sub-accounts in these examples are designated by a letter following the account number (suffix).  Please refer to your DSP's instructions for establishing sub-accounts.