Accounting · Rectification of Errors
Peach Co returned faulty goods to a supplier and received a credit note. When recording the credit note in the accounting system, the company omitted to account for sales tax and, instead, posted the gross amount of $1,296 to the returns outwards account. Both Peach Co and the supplier are registered for sales tax at the rate of 8%. What journal adjustment should Peach Co make to correct this error?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Debit Sales Tax $96, and Credit Purchases $250
- 2Debit Sales Tax $96, and Credit Returns Outwards $96✓
- 3Debit Sales Tax $96, and Credit Payables $250
- 4Debit Sales Tax $96, and Credit Cash at bank $300
Correct answer
Debit Sales Tax $96, and Credit Returns Outwards $96
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