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GST

UNIT 3 CH 4

QuestionAnswer
GST: goods and services tax, 10% tax levied by the federal gov't on most purchases of goods and services *excl fresh food
then does a GST L occur? when more GST is received than paid in a rep. period, s.p are usually higher than c/p so GST on sales will be greater than GST on purchases => CL
GST A occurs when? business has made a bulk order of stock (which it has not sold) or purchases of expensive NCA, GST on purchases are greater than its GST on sales. GST asset because ATO owes GST to business
sales invoice: a source doc used to verify a credit sale of stock
purchase invoice: a source doc used to verify a credit purchase of stock or other items
memos: a source doc used to verify an internal transaction
memo e.g. opening/closing/correcting entries, stock losses, gains, write downs + transfers, non-cash transactions with owner
statements of account a summary of the transactions a firm has had with a particular debtor/creditor over a certain period of time (usually month)
why does GST on purchases leads to a reduction in any GST liability. GST charged by suppliers is allowed to be deducted from GST liability. GST on purchases will be forwarded to ATO by firm's suppliers, so it is treated as if the business had actually paid the GST straight to ATO
WHY - Most small businesses will end up with a GST liability at the end of the period. As selling prices are usually higher than cost prices, in most cases the GST on sales will be greater than the GST on purchases, so the business will have a current liability in relation to the GST.
Small business could end up being owed a GST refund by the ATO. the business makes a bulk order of stock that it has not sold____the business purchases an expensive non-current asset = GST on purchases is greater than GST on sales
no GST to account for when cash is received from a debtor. There is no GST to account for because the GST is recognised and reported at the time a (credit) sale is made. To record GST at the point of a receipt from a debtor is to double-count the GST.
Created by: 96.0
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