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| *Ostroff, Fair and Company>>>Other Taxes |
What is the double entry for withholding tax for goods purchased and/or salary paid to employee? Thanks.? |
What is the double entry for withholding tax for goods purchased and/or salary paid to employee? Thanks.? I don't agree.... First off, let's suppose the purchase is of $100. And the sales tax is ten bucks extra. Because if the sales tax were included in $100, it would be $9.09. (Accrual basis - Sales Tax or VAT) (SALE) AR-Clients $1,100 dr Sales $1,000 cr Sales tax - payable $100 cr (COLLECTION) Banks - $1,100 dr AR-Clients $1,100 cr (PURCHASE) Inventory $1,000 dr Sales tax creditable $100 dr AP-Vendors $1,100 cr (PAYMENT) AP-Vendor $1,100 dr Bank - $1,100 cr (Cash flow Sales Tax or VAT) But did you really generate Sales Tax (or VAT) when you made the credit sale? The answer is no. Normally you would create a special account, probably with the following description: (Sales Tax Witholding - Pending ). You would credit the account at the moment you made the credit sale. Then, you would debit the account when you actually receive the payment, against Sales Tax Witholdings - Payable. This is also true, for purchases... For example: (SALE) AR-Clients $1,100 dr Sales $1,000 cr Sales tax witholdings - pending $100 cr (COLLECTION) Banks $1,100 dr AR-Client $1,100 cr Sales tax witholdings - pending $100 dr Sales tax witholdings - payable $100 cr For example: (PURCHASE) Inventory $1,000 dr Sales tax payable - pending $100 dr AP-Vendors $1,100 cr (PAYMENT) AP-Vendor $1,100 dr Bank - $1,100 cr Sales tax creditable $100 dr Sales tax payable - pending $100 cr I hope this information is still usefull to you... If this is not what you were looking for send me a message! Source(s): Accountant. Working towards my MBA in taxes. you are referring to double entry bookkeeping...which is accounting terminology for keep records of payments for expenses... |
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