Question

how would you journalize the transaction \sold merchandise on account\ in an expanded journal?
debit accounts payable and credit sales and sales tax payable
debit accounts receivable and credit sales and sales tax payable
debit sales and sales tax payable and credit cash
debit cash and credit sales and sales tax payable

Explanation:

When merchandise is sold on account, the customer owes the business money (Accounts Receivable increases - debit). Sales revenue is earned (Sales increases - credit) and if there is sales tax, the business owes that tax (Sales Tax Payable increases - credit).

• Option 1: Accounts Payable is for amounts the business owes, not for sales on account. So this is incorrect.
• Option 2: Accounts Receivable (debit) for the amount the customer will pay, Sales (credit) for the sale amount, and Sales Tax Payable (credit) if applicable. This is correct.
• Option 3: Debiting Sales (which is a revenue account, should be credited for increases) and crediting Cash (not received yet as it's on - account) is wrong.
• Option 4: Debiting Cash (not received yet as it's on - account) is incorrect.

Answer:

debit Accounts Receivable and credit Sales and Sales Tax Payable (the second option)