GST and Trial Balance Flashcards
GST free supplies
Fresh food Medical services Education Child care services Exports
Goods and services tax definition
Is a 10% tax that is added to the price of most products sold by a business in Australia and on products imported into Australia
Input taxed supplies definition
Are products that GST is not charged on and it is not possible to claim a GST input tax credit for the purchase of goods and services associated with these products
Calculating the GST
A business can calculate the amount of GST that it has to pay to the Australian Taxation Office each month or quarter of the year using one of two different methods
The amount of GST to be paid to the ATO is the difference between the GST payable and the GST input tax credits
GST registration
A business that has annual sales of $75000 or more must register with the Australian Taxation Office to collect GST and must charge GST on the products that it sells unless these products are exempt from GST
Australian business number
An ABN is an 11 digit number that is issued to a business and helps the Australian Taxation Office ensure that the business pays the correct amount of tax
Business activity statement
A business that has to pay GST will have to send the ATO, along with a cheque, a statement setting out he GST payable and the GST input tax credits
Questions to decide if GST should be charged on transactions
- Is this a business activity?
- Has the business received consideration?
- Is the transaction connected to Australia?
- Is the product exempt from GST?
General ledger definition
A ledger is an accounting record that contains a number of files. The important details of transactions are recorded in those files
Features of the general ledger
- The general ledger is made up of a series of files known as ledger accounts
Every type of asset, liability, equity, income and expense has its own ledger account - A ledger account has two sides. Known as a T account
- Each side of a ledger account has a date, cross-reference and amount column
GST credit and GST payable
GST credit- purchases, services used
GST payable- sales, services given
Debit and credit
Dr- cash at bank
Cr- loan at bank
Assets: dr increases, cr decreases Expenses: dr increases, cr decreases Liabilities: dr decreases, cr increases Income: dr decreases, cr increases Equity: dr decreases, cr increases
The trail balance
A list of the names and balances of each ledger account on a particular day. The trail balance has a debit column and a credit column. The entires in each column are totalled. The total of the debit column of a tail balance should always equal the total of the credit column
Purpose of preparing a trail balance
- Detect errors made in posting information into the general ledger
- Provide a list of general ledger account balances from which are prepared important accounting reports.
Errors found by preparing a trail balance
- Failing to record part of a transaction in the ledger
- Making two debit entries or two credit entries in the ledger
- Making a transposition error in the ledger.
A transposition error occurs when a set of numbers is written down or typed in an incorrect order - Incorrectly calculating a ledger account balance
- Leaving a ledger account balance out of the trail balance
- Recording a ledger account balance on the wrong side of the trail balance
