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In Profit & Loss Accounts, "Sales of Products" consists of
Price of Material & Excise. Why Sales Tax (CST or VAT) is
not considered as part of "Sales of Products".
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Answer / h.r. sreepada bhagi
Only the basic value of the products sold in income & taken
in to Profit & loss A/c. CST/VAT/Excise Duty collected in
the invoice is not income, but liability to be remitted to
governments & hence taken on the liabilities side (under
Current Liabilities) of the Balance Sheet.
In other words 'Gross Sales' is inclusive of tax & 'Net
Sales' is excluding Tax. Net Sales is Income & Tax portion
is liability.
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