Goods and Service Tax is collected and paid by businesses and the balance remitted to the Australian Taxation Office (ATO).
For General Ledger purposes, Cadzow 2000 handles this by collecting GST in a suspense account in the balance sheet.
When you sell something, the GST component is credited to the Suspense account, which increases your debt to the ATO.
When you purchase something, the GST component is debited to the Suspense account, which decreases your debt to the ATO.
Therefore at any given moment (assuming the General Ledger is up to date), the balance of the Suspense account is the net GST debt.
However, the debits and credits accumulate forever so at the end of each BAS period the GST Suspense account balance must be zeroed to reflect the fact that it has been paid. This is done by purchasing the GST balance from the ATO.
The procedure is:
- Generate the BAS report and complete the Business Activity Statement (BAS).
- Perform a General Ledger export to the end of the BAS period.
- Reconcile the final GST payable figure in the BAS against the GST Suspense account in the balance sheet. It should be the same, except for the over/under value arising from the rounding on the BAS.
- Enter a purchase from the ATO for the GST value from the balance sheet (ie. the true value accurate to the penny) and enter a line item representing the over/under value. The net value should then be the same as the figure on the BAS. The over/under value is a profit/loss item.
The effect of this transaction is to move the GST value out of the GST Suspense account and into Trade Creditors.
To make these entries, you will need an Analysis Account for the GST linked to the GST Suspense account in the Balance Sheet, and an Analysis Account for the GST Over/Under linked to a profit & loss account. You will then need stock codes linked to these Analysis Accounts.
Complete the purchase with any extra line items required, such as PAYG or PAYE Withholding.
- Perform another General Ledger export to the end of the BAS period.
- The GST Suspense value in the balance sheet should be 0.
- Pay the ATO as normal.