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Chapter 7
1.5 Accounting for sales tax
When making a sale the double entry will be:
Debit Receivables/cash account – gross amount
Credit Sales tax account – sales tax amount
Credit Sales account – net amount
When making a purchase the double entry will be:
Debit Purchases account – net amount
Debit Sales tax account – sales tax amount
Credit Payables/cash account – gross amount
If the organisation offers a discount, the sales tax must be
calculated after all discounts have been deducted. This is done
even if the cash discount is not actually taken.
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