GST Clearing Account  and Statement of Financial Position

Table of Contents

GST Clearing Account

  • is a ledger account for recording:
    • GST Received from sales.
    • GST Paid to suppliers
    • GST Remittance (payment) made to the Government and
    • GST Refunds made by the Government to the business.
GST Clearing Account
Date
Details
$
Date
Details
$
           
           

Procedure:

  • GST received from customers:
    • It is a Liability to the Government.
      • You owe it to the Government.
      • Liability is increasing
      • Credit the GST Clearing Account.
  • GST Paid to Suppliers by your business:
    • It is an asset to you
      • Government has to pay this back to you
      • Asset is increasing
      • Debit the GST Account.
  • Balance in the GST Clearing account:
    • If the GST Account has a debit balance
      • It is an asset.
      • Seek refund from the Government.
    • If the GST Account has a credit balance
      • It is a liability.
      • Remit that amount to the Govt.
  • The GST account acts both as an Asset account or Liability account, depending on the balance.
  • If the GST Account is:
    • Asset:
      • Place it under Current Asset in the Statement of Financial Position.
    • Liability
      • Place it under Current Liability on the Statement of Financial Position.

An ASSET Account

GST Clearing Account
Date
Details
$
Date
Details
$
xx Creditors
100
xx Debtors
80
   
  Balance c/d
20
   
100
   
100
  Balance b/f
20
   
 
In the Statement of Financial Position it will be entered under Current Assets:

Extract of Financial Position
Assets
$
$
Current Assets
Cash at Bank
xxx
Debtors
xxx
Stock
xxx
GST Clearing
20
 

A Liability Account

GST Clearing Account
Date
Details
$
Date
Details
$
xx Creditors
100
xx Debtors
180
  Balance c/d
80
     
   
180
   
180
   
  Balance b/f
80
 

Extract of Financial Position
Liability
$
$
Current Liability
Creditor
xxx
Prepaid Revenue
xxx
GST Clearing
80
 

GST and Cash Flow Statement

GST cash Flow is due to the operating activity of the business. GST will appear under the Operating activities.

These can be the payments and receipts of GST:

  1. GST received from Customers         +$xxx
  2. GST Paid to Suppliers                      -$xxx
  3. GST Payment to Government          -$xxx
  4. GST Refund from the Government  +$xxx  (payment and Refund can not occur together)

Extract of Cash Flow Statement
Cash Receipts from Operating Activities
$
$
Cash form Customers
1500
nbsp;
GST received from Customers
2000
nbsp;
GST Paid to Suppliers
(2000)
nbsp;
GST Paid to Government
(2000)
nbsp;
GST Refund from Government
xxx
 
Net cash Flow from Operating Activities
(500)
nbsp;
 

 

brackets ( ) indicate a negative value

(payment and refund to ATO can not occur at the same time)