GST - How to calculate / manage / track GST.

[Doctorcam]

* Benjamin Carlyle (benjamincarlyle at optusnet.com.au) wrote:
> 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.
 
In practice, if it reversed, you would not be in business long. :-)

In Canada, where the GST is 7%, and (unlike Australia) added to the
fee or price, you must charge for it if your revenues exceed $30,000 per
annum.  For the most part, you cannot claim GST you have paid without
being registered and charging your customers or clients.  

Any imbalance is likely to be temporary (and as I have recently
incorporated, I did have a positive net for a few weeks, until my
first invoice went out).
 
> 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. 

You could always move the imbalance before reporting - it would make
sense to have a specific transaction, as such a thing would be
noteworthy.

Cam


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Cam Ellison  Ph.D.  R.Psych. #01417

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