Question

In which financial statement should we classify the following into:-
a) Income tax
b) Sales tax collected

Answer 1

↵Nusaha, for sole proprietor 'income tax' is not an expense. It is paid by the proprietor and not from business. Therefore, it is deducted from the Capital of proprietor in the Balance Sheet. '

'Sales Tax' is levied on the sales made during the year. The seller collects the tax from the purchaser and then he (the seller) pays the tax so collected to the government authority.
In this manner, if Sales Tax Collected (Sales Tax ) is given on the credit side of the Trial Balance, then it is shown on the Liabilities side of the Balance Sheet.