[access2008]

I do bookkeeping for a company that owns a store. The owner currently enters the sales each day as journal entries. He debits the sales tax in an income account and credits it in sales tax payable. This should not be in an income account on the P& L, so which account does it need to go to? Thanks!

[morgaine300]

The sales tax has nothing to do with the store itself. It belongs to the state (or other locality) and the store is merely a third party collecting it and passing it onto the state. There is not income or expense involved.

The cr to the payable is correct, until such time that it's paid. The dr is either cash or receivables -- because it's the customer who is actually paying it. i.e. the dr is whatever the dr already was for the payment of the goods.

I'm real darn curious -- if the owner is debiting to income (which is negative income), what the heck is he doing with the cash that was received from the customer for the tax?? I have to wonder if something is a terrible mess. That's what happens when owners try to do entries.

(I've had to straighten up too many messes like that. Gives me the shivers.)