Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

2. Transaction Analysis

Journal Entries: Debits and Credits

Financial Accounting

2. Transaction Analysis

Journal Entries: Debits and Credits

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Multiple Choice

When the seller collects sales taxes from the customer at the time of sale, the sales taxes are reported as:

a liability on the balance sheet

owner's equity

revenue on the income statement

an expense on the income statement

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Verified step by step guidance

Understand the nature of sales taxes: Sales taxes collected by the seller are not revenue or income for the seller. Instead, they are amounts collected on behalf of the government and must be remitted to the appropriate tax authority.

Identify the accounting treatment: Since the seller is obligated to pay the collected sales taxes to the government, these amounts are considered a liability until they are paid. A liability represents an obligation or debt owed by the business.

Determine the correct financial statement: Liabilities are reported on the balance sheet, which shows the financial position of the company, including its assets, liabilities, and owner's equity.

Clarify why other options are incorrect: Sales taxes are not part of owner's equity because they do not belong to the business. They are not revenue because they are not earned by the business, and they are not an expense because they do not represent a cost incurred by the business.

Conclude that sales taxes collected at the time of sale are reported as a liability on the balance sheet, reflecting the seller's obligation to remit these taxes to the government.