Accounting Chapter 10

Purchases and sales of merchandise are the two major activities of a merchandising business.

• True

• False

Sales tax rates are usually stated as a percentage of sales.

• True

• False

Very few states in the United States require collecting a tax on sales of merchandise to customers.

• True

• False

Every business collecting a sales tax needs accurate records of the amount of total sales and total sales tax collected.

• True

• False

Businesses must file reports with the proper government unit and pay the amount of sales tax collected.

• True

• False

The amount of sales tax collected is an asset of the business until paid to the state government.

• True

• False

The amount of sales tax collected is recorded in a separate liability account titled Sales Tax Payable.

• True

• False

Sales Tax Payable has a normal credit balance.

• True

• False

A sale of merchandise increases the revenue of a business.

• True

• False

Regardless of when payment is received, the revenue should be recorded when a sale is made, not on the date cash is received.

• True

• False