Unit # 15 – Sales Taxes

Unit # 15 – Sales Taxes

What are Sales Taxes? We all know that there are 2 things

guaranteed in in life: Death Taxes

In Ontario we Used to “record” two types of taxes Provincial Sales Tax (PST) Goods & Services Sales Tax (GST)

Unit # 15 – Sales Taxes

Now we only record 1 type: HST HST is calculated at 13% of the ticket

price. Note: The “Ticket Price” is the price that

is shown on the merchandise.

Unit # 15 – Sales Taxes

Contra Accounts revisited Recall that Contra Accounts are

accounts that are “married” to each other but act Contrary to each other.

To record transactions with Sales Taxes, you will require your 2nd Contra Account (Drawings was your first)

Unit # 15 – Sales Taxes

HST Recoverable (or Receiveable) is “married” to HST Payable

Together they determine how much money you owe the government.

Unit # 15 – Sales Taxes

HST Payable is a Liability Accounts. This is because the business owner

collects the money from the sale, but has to give it to the Government (owes it to the Government).

Therefore, HST Recoverable (or Receivable) is a Contra-Liability account!

Unit # 15 – Sales Taxes

Entering Sales Tax transactions into the General Journal.

Remember! HST Payable only when selling HST Recoverable only when buying

Unit # 15 – Sales Taxes Buying Example #1

HST Example: Dec. 1 - Bought supplies for $1000 plus HST. Note: This is same for any Asset or Expense

Account

 

Date Particulars P.R. Debit Credit

 

1             1

2                 2

3                 3

Dec. 1 Supplies 120 1000

Cash 100 1130

Unit # 15 – Sales TaxesSelling Example # 1

HST Example: Dec. 1 – Sold $1000 + HST worth of pictures.

 Date Particulars P.R. Debit Credit

 

1             1

2                 2

3                 3

Unit # 15 – Sales TaxesRemitting the Tax

HST: This a little trickier. Total up the HST Payable & HST Recoverable Accounts

Unit # 15 – Sales TaxesRemitting the Tax

If the HST Payable account is larger then the HST Recoverable, send the difference to Ottawa.

 

Date Particulars P.R. Debit Credit 

1             1

2                 2

3                 3

4                 4

Unit # 15 – Sales TaxesRemitting the Tax

If the HST Recoverable is larger than HST Payable then expect a Cheque from Ottawa (using Accounts Receivable)

 

Date Particulars P.R. Debit Credit 

1             1

2                 2

3                 3

4                 4