ACCA FA · Chapter 4 · Question 1 of 10
A business registered for sales tax sells goods on credit for $4,800, including sales tax at 20%. Which journal correctly records the sale?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) Debit Receivables $4,800; Credit Revenue $4,000; Credit Sales tax $800
Explanation
The $4,800 is the gross (tax-inclusive) amount. Sales tax = $4,800 x 20/120 = $800, so revenue = $4,800 - $800 = $4,000. The receivable is the full $4,800 owed by the customer. Taking 20% of the gross amount ($960) is a common error because 20% applies to the net price.
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