Sample Essay On Accounting

Sales is an activity which involves the transfer of goods from one person to another, along with the transfer of goods, it also means the transfer of ownership and risk in the goods. In exchange for the goods, a payment is received immediately or in the future, which means the goods are sold in cash or credit. Cash sales means immediate receipt of money for the goods and credit sales means the receipt of money is determined for some time in the future. Each time a sales is made, the sales account is credited and the cash or bank account is debited. This is as per the rules of accounting which says debit what comes in and credit what goes out. A sale also affects account receivables.
Sales tax is the amount payable in case of sales of goods and services. The sales tax is payable to a governing body at the time of sales of goods. There are various types of sales tax depending on the goods and country in which the manufacturer is selling the goods. Sales tax is an amount to be paid by the seller. Hence it is a liability for him until it is paid. The liability is shown under current liabilities until the amount is paid. Any amount payable is shown as a liability. Sales tax is not immediately paid when sales are carried out. The amount of sales tax is paid at the end of a quarter, hence until then it remains as a liability. Any liability is shown in the balance sheet under current liabilities. The amount is credited in the sales tax account and when the payment is made, the sales tax account is debited. As per the rules of accounting, any expenses or loss are to be credited and any income and gains are to be debited. This is the reason why the sales tax payable account is credited. It is only debited once the payment is carried out. Until then, the amount is accumulated in the sales tax payable account.
Each time a sales is made, sales tax is payable. The sales tax account is then credited with the amount of sales tax payable and the accumulated amount is then paid at the end of the quarter. This is when the account is debited. The sales tax payable account is a liability and hence any amount is credited in the same. It is also shown as a current liability in the Balance Sheet until the amount is completely paid off. The sales account is credited and the cash or bank account is debited. The sales tax account is also credited with the amount of sales tax. The same will eventually be debited once the payment is made through. If an amount is paid in advance then the account is shown as an asset in the Balance Sheet. In case of sales tax payable, it is inverse. It is a liability account and the same is credited each time a sales is made. This is to ensure that a separate account is maintained for the sales tax payable and the amounts are credited in the same. Because it is an account payable, it will have a credit balance and the same will be nil once all the payment has been processed.
In other words, whatever is yet to be paid is shown in a separate account which is a liability and the account is of the amount payable. Whatever amount is paid, is then debited from the account and the balance is reduced. The effect of the same is shown in the Balance Sheet at the respective sides. Basically, a sales tax payable account is credited so as to accumulate the amount in the sales tax payable account and the payment is made after intervals. Any account which consists of an amount payable will be credited and will be shown as a liability. Hence a sales tax payable account is credited whenever a sales is conducted and the same is shown as a liability. This occurs each time a sales is made which is subject to the payment of sales tax.

References

Is sales tax an expense or liability. (n.d.). Retrieved from Accounting Tools: http://www.accountingtools.com/questions-and-answers/is-sales-tax-an-expense-or-a-liability.html
Sales Tax. (n.d.). Retrieved from Accounting Simplified: http://accounting-simplified.com/accounting-for-sales-tax.html