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minersgrabngo
Level 1

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

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 Comments 2
BigRedConsulting
Community Champion

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

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
Level 15

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

@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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