I n t e r a c t I v e t e X t foundations in Accountancy/ acca financial accounting (ffa/FA) bpp learning Media is an acca approved Content Provider

3 

Purchases of goods costing $500 subject to sales tax at 15% occur. Which of the following correctly 

records the credit purchase? 

 A 

DEBIT 

Purchases 

$500.00 

  DEBIT 

Sales 

tax 

$75.00 

  CREDIT 

Payables 

 

$575.00 

 B 

DEBIT 

Purchases 

$575.00 

  CREDIT 

Payables 

 

$575.00 

 C 

DEBIT 

Purchases 

$434.78 

  DEBIT 

Sales 

tax 

$65.22 

  CREDIT 

Payables 

 

$500.00 

 D 

DEBIT 

Purchases 

$500.00 

  CREDIT 

Sales 

tax 

 

$65.22 

  CREDIT 

 

 

 

Payables 

         

 

 

 

 

 

 

$434.78 

4 

A business purchases goods valued at $400. Sales tax is charged at 15%. What is the double entry to 

record the purchase? 

 DEBIT 

........................................  

$................  

 DEBIT 

........................................  

$................ 

 

CREDIT    ........................................  

 

$................  

5 

Fill in the blanks. 

 

Input sales tax is the sales tax ....................... on goods and services ………… by the business; output 

 

sales tax is the sales tax .................... on goods and services ................... by the business. 

6 

When a cash sale is made for $316.25 (including sales tax at 15%) the entries made are: 

 DEBIT 

........................................ account 

$................ 

 CREDIT 

........................................ account 

 

$................ 

 CREDIT 

........................................ account 

 

$................ 

QUICK QUIZ

CHAPTER ROUNDUP 

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CHAPTER 13  

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  SALES TAX 

 

233 

7 

When a cash purchase of $172.50 is made (including sales tax at 15%), what are the double 

entries required? 

A DEBIT 

Purchases 

172.50 

 CREDIT 

Cash 

 

172.50 

B DEBIT Purchases 

150.00 

 DEBIT 

Sales 

tax 

22.50 

 CREDIT 

Cash 

 

172.50 

C DEBIT 

Cash 

150.00 

 DEBIT 

Sales 

tax 

22.50 

 CREDIT 

Purchases 

 

172.50 

D DEBIT Cash 

172.50 

 CREDIT 

Purchases 

 

172.50 

8 

Fill in the blanks. 

 

The sales tax paid to the tax authorities is the difference between ........................................ 

........................................ and ........................................ ........................................  

9 

A trader is registered for sales tax. During a period, they have sales of $5,750 including sales tax at 

15% and purchases of $2,500 excluding sales tax. What amount is owed to or due from the tax 

authorities at the end of the period? 

A 

$487.50 owed to 

B 

$487.50 due from 

C 

$375.00 owed to 

D 

$375.00 due from  

 

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PART D: RECORDING TRANSACTIONS AND EVENTS 

 

234

 

1 

B 

Sales tax is an indirect tax. Some sales tax paid on inputs is irrecoverable and cannot be 

reclaimed. Only sales tax registered traders can charge sales tax.  

2 

B 

The irrecoverable sales tax should be included in the cost of the asset capitalised. The statement 

of financial position value will therefore include sales tax and the depreciation charge will rise 

accordingly.  

3 

A 

Correct, recoverable input tax is debited to the sales tax a/c and the purchases account is debited 

net of sales tax. 

 

B 

Incorrect, the sales tax has not been reclaimed. 

 

C 

Incorrect, the $500 is subject to sales tax. 

 

D 

Incorrect, reversal of the sales tax transaction has occurred. 

4 DEBIT  Purchases $400 

 DEBIT  Sales tax 

  $60 

 CREDIT Cash or payables 

 

$460 

5 

Input sales tax is the sales tax suffered on goods and services bought by the business; output sales tax 

is the sales tax collected on goods and services sold by the business. 

6 

$316.25 is the gross amount including sales tax. The net amount is equal to the gross amount  (1 + 

tax rate), ie $316.25  1.15 = $275. The sales tax is therefore the difference between the gross and 

net amounts ie. $316.25 – $275 = $41.25 

 DEBIT  Cash account 

$316.25 

 CREDIT Sales account 

 

$275.00 

 CREDIT Sales tax account 

                   $41.25 

7    

B DEBIT Purchases 

$150.00 

 

DEBIT 

Sales tax                        $22.50 

 CREDIT 

Cash 

$172.50 

8 

The sales tax paid to the tax authorities is the difference between output sales tax collected on sales 

and input sales tax suffered on purchases and expenses. 

9 

C 

$375.00 owed to the tax authorities. Output tax on sales $750.00 (5,750/1.15  0.15) less 

input tax on purchases $375.00 (2,500  0.15), leaves a net amount of $375.00 due to the tax 

authorities. 

 

 

 

Now try ... 

 

Attempt the questions below from the Practice Question Bank 

 

Qs 25 – 28 

 

 

 

 

 

 

 

 

 

 

 

 

ANSWERS TO QUICK QUIZ 

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235 

 

 

Preparing a trial balance

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