Chapter 6.3 & 6.4
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Transcript Chapter 6.3 & 6.4
Tax dollars generated from business
transactions
1.
Tax dollars are charged to the buyer of
goods
2.
The tax dollars are collected by the seller
and recorded in a separate liability account
3.
The tax dollars rightfully belong to the
government
4.
The seller sends the tax dollars to the
government at appoint times
in Canada is commonly called Provincial
Sales Tax (PST) because it is a tax
charged by some provincial
governments. The tax is calculated as a
percentage of the price of a good and
is paid by the consumer
Harmonized sales Tax- 13%, July 1, 2010
Percentage tax based on price of
goods/ services sold to consumer
Used by government to collect revenue
to spend on services
2008 PST: 8%, GST: 5%
The Seller or Vendor – is responsible for
administering the HST and remitting it to
the Federal Government, which includes:
› Calculating the taxes (PST & GST) + adding it
into the price of goods / services
› Collecting tax from customers + remitting (to
pay) to levels of government
Bank
(cash sales) or A/R Sales
Invoice
› Revenue
› HST Payable (13%) liability
account to accumulate tax.
Is responsible for accounting for HST on
purchases related to the operations of
the business and by submitting the Input
Tax Credit for the appropriate refund
Assets/ Expense
HST Recoverable
› Bank or A/P
Cheque
Copy
Purchase
Invoice
“Contra liability”
account used to
recover taxes
paid on
purchases for
operating
business
complete “input
tax credit” for
refund of HST
(DR)
Small business pays (remits) annually
Mid-size business remits quarterly (3
months)
Large business remits by the 15th the
following month
Sales to Customer
HST PAYABLE
13
13
13
39
Tax Paid on Purchase
HST RECOVERABLE
13
13
26
Remittance HST Payable – Recoverable
= 39 – 26
= 13
DR
39
HST Payable
HST Recoverable
Cash
To record HST Remittance
CR
26
13
Sales to Customer
HST PAYABLE
13
13
26
Tax Paid on Purchase
HST RECOVERABLE
13
13
13
39
Refund HST Recoverable > Payable
= 39 – 26
= 13
HST Payable
Cash
HST Recoverable
To record HST Refund
DR
26
13
CR
39