explain the treatment of gst in balance sheet
Answers
Answer:
2The GST liability on the sale of fixed assets shall be checked as follows: ITC not availed- GST is applicable on the transaction value. ITC is availed-If the asset has been sold within 5 years, GST shall be paid on higher of the following.
Answer:
Businesses are required to collect 10% GST, or General Services Tax, on all goods and services provided. Depending on how the money is collected, there are different tax and accounting procedures. If we collect GST from customers, the amount is recorded in a special clearing account called the GST Clearing. It's a credit because it increases our liability. We are liable to the Australian Tax Office to pay 10% of goods and services sold. However, if the business makes purchases, then we debit the GST Clearing Account for the amount paid. These purchases are expenses, and therefore, it decreases the amount we will owe to the Australian
$467.50 / 11 = $42.50 GST
GST Clearing Account
Now that we have an understanding of how GST is collected, let's look at some examples. We'll be using the example of a small business, a butcher, and her various sales and expenditures. We'll be logging these entries into the general journal, which has a column for the date, particulars, and the debits and credits. The totals for the accounts (such as Bank or Sales) will be entered into the general ledger and applicable statements (income statement, balance sheet).
On July 1, our butcher bought a set of knives on credit for $1,250 plus GST. She (or her accountant) will need to enter the increase to inventory (debit), the credit to cash, and the GST as follows in this table:
Date Particulars Debit Credit
1-July Inventory (purchase of knives) 1250
GST Clearing 125
Accounts Payable 1375
Remember that the entry to GST Clearing results in a debit (decrease) in our overall GST liability to the Tax Office. In this case, 10% of $1,250 is $125, and this is this amount booked.
Now that our butcher has some knives (and a lot of other equipment!) she can start selling products and services. She completes a sale for the processing of some wild game. The total sale is $750 plus GST. The general journal entry will look like this one:
To unlock this lesson you must be a Study.com Member. Create your account
Register to view this lesson
Are you a student or a teacher?
Bryce S.
Student
United States
A textbook can only get you so far. The video aid provided by Study.com really helps connect the dots for a much deeper understanding.
Business / VCE Accounting: Exam Prep & Study Guide
VCE Accounting: Exam Prep & Study Guide
15 chapters | 127 lessons | 11