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kalipaint · Jun 13, 2007, 05:23 AM

Hi, we have a small engine repair business. On the receipts there is the labor which I know is not taxable. Also there are parts we use to fix the engines that we city tax the customers for. I've been making my journal entries like this: Cash -debit, service revenue - credit, sales (these are the parts) credit, and sales tax payable - credit. Am I doing this correctly and do I carry the balances over in the general ledger for the next month, or do I need to close these accounts out every month? Will my finanacial statements balance with these kind of entries? Thank you in advance

CaptainForest · Jun 13, 2007, 09:02 AM

So if I am understanding you correctly…

You are (for example):
Dr. Cash 100
Cr. Sales 90
Cr. Taxes Payable 10

That seems perfectly fine as long as you are receiving cash for services…

As for you second question about whether to close the sales account month to month. You do not have to. You only close the Sales account at the end of your fiscal year.

juneann · May 1, 2009, 03:49 PM

Journal entry of sales tax with a service business

morgaine300 · May 1, 2009, 07:13 PM

Revenues and expenses and drawings will close out to capital. None of your assets or liabilities do. So you can't say "an entry" closes or doesn't close. It's the account balances when you get done that you're concerned about. Think about it logically -- when your start 2010, will you want 2009's revenues and expenses on there? No, because you want to know what happened in 2009 separately from 2010. But an asset account like cash, is that going to start over at a zero balance when 2010 comes? No - that balance will still remain. Whatever is in your sales tax payable at year-end will still exist when 2010 starts.

If you're using accounting software, it should be doing this automatically, as long as you have all your accounts categorized correctly.

mkawachat · Oct 24, 2009, 02:12 AM

In sales what is the sale tax entry

morgaine300 · Oct 24, 2009, 11:39 PM

You should start your own thread for your question instead of tagging onto a two year old one.

Apparently you did not even bother to read the thread, because the answer is already there.

bharathreddy · Sep 29, 2011, 01:07 AM

Cash a/c Dr.
To sales a/c
To Tax payable a/c