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minersgrabngo
January 26, 2024
Question

What category is "cash" under when I make a journal entry for sales tax collected?

  • January 26, 2024
  • 2 replies
  • 0 views
I have daily deposits into my bank from square, with the credit card processing fees already deducted. Included in that deposit is the amount of tax collected. I understand I need to make a journal entry for the sales tax, with "Cash" being debited, and "Sales Tax Payable" being credited. But what is the "Cash" category? Is it an income category? An asset? Not sure what category it belongs in.

2 replies

BigRedConsulting
BigRedConsulting
February 3, 2024

I don't think cash is involved, given that you have the cash for the sales tax and sales, and if all was recorded using a sales income account, then that likely the offsetting account.

 

It would probably be preferable to edit the deposit and split the gross sales amount between the appropriate income account(s) and a sales tax liability account, and then you don't need a journal at all.

Rainflurry
Rainflurry
February 3, 2024

@minersgrabngo 

 

In this case, "cash" is your bank account (asset) that Square deposits to.  The term "cash" is used interchangeably for actual cash received and deposits to a bank account.     

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