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ACCA Applied Knowledge · Financial Accounting · Sales and purchases

Kora Ltd sells goods on credit for a total of $11,500 including sales tax at 15%. How should the sale be recorded in the ledger?

Receivables are debited $11,500, sales revenue is credited $10,000 and sales tax payable is credited $1,500. The tax is collected on behalf of the tax authority, so it is a liability and not revenue; net is gross divided by 1.15.

  1. ADr Receivables $11,500; Cr Sales revenue $10,000; Cr Sales tax payable $1,500Correct
  2. BDr Receivables $11,500; Cr Sales revenue $11,500
  3. CDr Receivables $10,000; Cr Sales revenue $10,000
  4. DDr Receivables $11,500; Cr Sales revenue $9,775; Cr Sales tax payable $1,725

Explanation

Gross $11,500 divided by 1.15 gives net $10,000, and tax is $1,500. Receivables are debited with the gross amount, revenue credited with net and the tax liability credited with $1,500. Option D wrongly deducts 15% of the gross figure.

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