When a Business Sells an Item and Collects a State

question 51

True/False

When a business sells an item and collects a state sales tax on it, a current liability arises.

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Definitions:

Credit Sales

Sales made by a business that allow the buyer to pay at a later date, typically recorded as accounts receivable.

Cost Of Goods Sold

The direct costs attributable to the production of the goods sold by a company, including material and labor expenses.

Liquidity Ratio

A financial metric used to determine how quickly a company can pay off its short-term liabilities with its liquid assets.

Maturing Obligations

Debts or promises due to be settled or fulfilled within a short timeframe, usually within the next fiscal year.