When reporting on the General Fund in the fund financial statements,what is the general principle regarding the accrual of sales taxes collected by merchants but not yet remitted to the taxing government?
A)sales taxes should be recognized only if received by the state by year end
B)sales taxes should be recognized when the merchant makes the sale provided taxes are received early enough in the following year to finance expenditures of the period covered by the statements
C)sales taxes should be accrued provided they are received within 15 days after the end of the accounting period
D)sales taxes should be accrued based on an estimate of amounts received by merchants but not yet remitted to the state,regardless of when the taxes are remitted

Question

Quizplus · Accepted Answer

The general principle is that sales taxes should be recognized when the merchant makes the sale provided taxes are received early enough in the following year to finance expenditures of the period covered by the statements. This is known as the modified accrual basis of accounting, which recognizes revenues when they are both measurable and available. In the case of sales taxes, they are measurable at the time of the sale and available if they will be received in time to finance expenditures. Therefore, sales taxes should be recognized in the General Fund when the merchant makes the sale.

When Reporting on the General Fund in the Fund Financial