Which account should be credited when receiving the collection of sales tax?

When a governmental entity receives the collection of sales tax, it is necessary to recognize the revenue generated from that tax. The account that should be credited in this situation is the revenues control account, which reflects the increase in revenue due to the collection of the sales tax.

In governmental accounting, sales tax collections are recognized as revenue when received, thus increasing the overall revenues of the entity. This recognition is essential as it aligns with the revenue recognition principle, which states that revenues should be recognized when they are earned and realizable.

Choosing to credit the revenues control account appropriately reflects the increase in resources available to the government as a result of sales tax collections, facilitating proper accounting and financial reporting. This ensures that the government can track its revenues accurately, which is vital for budgeting and financial analysis.

Cash, accounts receivable, or payables related to tax anticipation notes represent other financial activities but do not directly reflect the increase in revenues at the moment of collection. By crediting the revenues control account, the entry accurately captures the nature of the transaction in the government’s financial statements.