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

Sales taxes collected by a retailer are recorded by:

Debiting a revenue account

Crediting a liability account

Crediting an expense account

Debiting a liability account

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

Identify the correct accounting treatment: Since sales taxes are collected as a liability (an obligation to pay the government), they should be recorded in a liability account, not a revenue or expense account.

Determine the correct journal entry: When sales taxes are collected, the retailer should credit (increase) a liability account, such as 'Sales Tax Payable,' to reflect the obligation to remit the taxes.

Analyze why other options are incorrect: Debiting a revenue account or crediting an expense account would misrepresent the nature of sales taxes, as they are neither income nor expenses for the retailer.

Conclude the correct answer: The correct accounting treatment is to credit a liability account, such as 'Sales Tax Payable,' when sales taxes are collected.