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ACCA Applied Knowledge · Financial Accounting · Sales and purchases

Dalton Ltd's sales day book for March shows: invoices net of sales tax $40,000, sales tax at 20% $8,000, total $48,000. Which entry correctly posts the monthly totals to the general ledger?

Debit receivables control $48,000, credit sales $40,000 and credit sales tax payable $8,000. Customers owe the gross invoice value, revenue is recorded net of tax, and the sales tax is a liability owed to the tax authority rather than income of the business.

  1. ADr Receivables control $48,000; Cr Sales $40,000; Cr Sales tax payable $8,000Correct
  2. BDr Receivables control $40,000; Dr Sales tax $8,000; Cr Sales $48,000
  3. CDr Sales $48,000; Cr Receivables control $40,000; Cr Sales tax $8,000
  4. DDr Receivables control $48,000; Cr Sales $48,000

Explanation

Customers owe the gross amount, so receivables control is debited $48,000. Sales revenue is credited with the net $40,000 and the sales tax collected for the tax authority, $8,000, is credited to a liability account. Option D wrongly includes the tax in revenue.

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