Chapter 11, Problem 3RQ

To determine

Sales Tax:

The Government levies sales tax on sale of goods or services by a retailer. Sales tax is generally based on the certain percentage of the sale amount and forms a part of Government revenue. The retailer needs to collect the same from the customer and remit it to the Government. Until the sales tax collected is remitted, it forms part of the current liabilities of the business. In case a business purchases goods, sales tax paid to the seller forms part of the cost of goods purchased.

To explain:

The recording of sales tax and if it is considered as business expense and the reason for the same