Table of contents

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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

9. Current Liabilities

Types of Liabilities

Financial Accounting

9. Current Liabilities

Types of Liabilities

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Multiple Choice

Why is sales tax collected by a business considered a liability?

Because the business is required to remit the collected sales tax to the government.

Because sales tax collected is an expense for the business.

Because sales tax collected increases the owner's equity.

Because the business can keep the sales tax as additional revenue.

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Verified step by step guidance

Understand the concept of sales tax: Sales tax is a percentage of the sale price that businesses collect from customers on behalf of the government.

Recognize the role of the business: The business acts as an intermediary, collecting the sales tax from customers and holding it temporarily until it is remitted to the government.

Classify the collected sales tax: Since the business is obligated to pay the collected sales tax to the government, it is considered a liability, not revenue or equity.

Eliminate incorrect options: Sales tax collected is not an expense for the business, does not increase owner's equity, and cannot be kept as additional revenue.

Conclude the correct reasoning: Sales tax collected by a business is considered a liability because the business is required to remit the collected amount to the government.