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 2 nd 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 DateParticulars P.R. DebitCredit Dec. 1 Supplies Cash

Unit # 15 – Sales Taxes Selling Example # 1  HST Example: Dec. 1 – Sold $ HST worth of pictures. DateParticulars P.R. DebitCredit

Unit # 15 – Sales Taxes Remitting the Tax  HST: This a little trickier. Total up the HST Payable & HST Recoverable Accounts

Unit # 15 – Sales Taxes Remitting the Tax  If the HST Payable account is larger then the HST Recoverable, send the difference to Ottawa. DateParticulars P.R. DebitCredit

Unit # 15 – Sales Taxes Remitting the Tax  If the HST Recoverable is larger than HST Payable then expect a Cheque from Ottawa (using Accounts Receivable) DateParticulars P.R. DebitCredit