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Published byTracey Hawkins Modified over 9 years ago
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Tax dollars generated from business transactions
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1. Tax dollars are charged to the buyer of goods 2. The tax dollars are collected by the seller and recorded in a separate liability account 3. The tax dollars rightfully belong to the government 4. The seller sends the tax dollars to the government at appoint times
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in Canada is commonly called Provincial Sales Tax (PST) because it is a tax charged by some provincial governments. The tax is calculated as a percentage of the price of a good and is paid by the consumer
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Harmonized sales Tax- 13%, July 1, 2010 Percentage tax based on price of goods/ services sold to consumer Used by government to collect revenue to spend on services 2008 PST: 8%, GST: 5%
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The Seller or Vendor – is responsible for administering the HST and remitting it to the Federal Government, which includes: › Calculating the taxes (PST & GST) + adding it into the price of goods / services › Collecting tax from customers + remitting (to pay) to levels of government
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Bank (cash sales) or A/R Sales Invoice › Revenue › HST Payable (13%) liability account to accumulate tax.
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Is responsible for accounting for HST on purchases related to the operations of the business and by submitting the Input Tax Credit for the appropriate refund
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“ Contra liability” account used to recover taxes paid on purchases for operating business complete “input tax credit” for refund of HST (DR) Assets/ Expense HST Recoverable › Bank or A/P Cheque Copy Purchase Invoice
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Small business pays (remits) annually Mid-size business remits quarterly (3 months) Large business remits by the 15 th the following month
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Sales to Customer Tax Paid on Purchase 13 39 26 Remittance HST Payable – Recoverable = 39 – 26 = 13 HST RECOVERABLE HST PAYABLE
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DRCR HST Payable 39 HST Recoverable26 Cash13 To record HST Remittance
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Sales to Customer Tax Paid on Purchase 13 26 39 Refund HST Recoverable > Payable = 39 – 26 = 13 HST RECOVERABLE HST PAYABLE
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DRCR HST Payable 26 Cash13 HST Recoverable39 To record HST Refund
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