GST - How to calculate / manage / track GST.

[Benjamin Carlyle]

On Wed, 2004-06-09 at 19:18, John Pettigrew wrote:
> In a previous message, Doctorcam <cam at ellisonpsychology.ca> wrote:
> > I know it looks odd.  The tree is:
> > Liabilities ->GST
> >    ->GST Paid
> >    ->GST Payable
> This is very similar to the way I handle Fixed assets:
> Assets
>    Fixed
>       Fixed Assets
>       Depreciation

This is a stock-standard accounting hierarchy which my textbook calls a
"Contra-" account. Depreciation is a contra-account to Fixed Assets,
which is to say that it negates a portion of that account's value.

As I said, this is kosher for depreciation since depreciation never
exceeds the value of Fixed Assets. I'm not 100% sure of GST example.
Although it obviously works in practice, as Derick has pointed out the
GST Paid is an asset and not a liability. It works fine as a
contra-account while its value is less than GST Payable (the usual case
for a business), but is a touch less kosher should the GST Paid account
value be greater than the GST Payable account value. In this case, the
GST Clearing parent account changes from a liability to an asset and the
government will pay your business back that money next tax period.

Well... it works, so I won't bash it too much... and again I'm not an
accountant. I do feel its slightly wrong, though. I guess it is more a
feature of the modelling of account trees that gnucash supports (perhaps
it supports more than I understand). Its true that some asset accounts
stay assets even when their in credit, and some liability accounts stay
liabilities when they're in debit. That's what the contra-accounts are
all about. Other kinds of accounts, such as accounts payable and
receivable and GST Clearing can cross over between asset and liability.
According to my textbook an over-paid payable must (should?) be reported
as an asset on the balance sheet, while an over-paid receivable must
(should?) be reported as a liability at least under Australian GAAP. I
guess in the end all it means is that all top-level accounts are either
Owner's Equity, or are Asset if DR and Liability if CR. I suppose
reports are already available that make this work.

Benjamin.