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October 15, 2008

How do you record the sales tax on the purchase of an asset?

Accountants define the cost of an asset as all of the costs that are necessary to obtain the asset and to get it ready for use.

If your state does not allow an exemption from sales tax for the asset you purchased, the sales tax should be recorded as part of the cost of the asset.




Comments

8 Responses to “How do you record the sales tax on the purchase of an asset?”

  1. suha on October 16th, 2008 12:15 pm

    thank you verey much

  2. noha on October 16th, 2008 3:55 pm

    thanks alot

  3. venkat on November 3rd, 2008 6:48 am

    it is better to give the explanation abt depreciation, if we take the sales tax as input.

  4. Murtaza on November 23rd, 2008 4:36 pm

    well…i have check many books which are applying sales tax after the discount..
    example: this is the outlay..

    List price xxx
    less: trade discount (rate if any) xxx
    invoice cost xxx
    less: cash discount (rate if any) xxx
    cash price xxx
    add: sales tax (on cashprice) xxx
    net cash price xxx
    add other expenses (if any) xxx
    total cost xxx

    the sales tax is applied on cash price…
    so is it right or not and ya but meigs and meigs a famous accounting book says that sales tax is applied or taken out (if rate given) on list price…

  5. Murtaza on November 23rd, 2008 4:37 pm

    which is the right method to calculate sales tax?? !!

    after discount or before discount? !!

  6. Murtaza on November 23rd, 2008 4:37 pm

    which is the right method to calculate sales tax?? !!

    i mean on list price or on cash price?? !!

  7. K.K.Ray on May 5th, 2009 1:32 pm

    Only those taxes should be added to cost that are non-refundable, if sales tax is in the nature of refund/adjustment it shouldn’t be capitalised.

  8. P.RAMAMURTHY on October 5th, 2009 8:53 am

    i think cash price is the correct method

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