CHAPTER 2 Source documents and goods and services tax
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PPTs to accompany Accounting and Bookkeeping: Principles & Practice by AAT and David Willis 2011 McGraw-Hill Australia Pty Ltd CHAPTER 2 Source documents and goods and services tax Learning outcome To understand the different types of source documents and the operation of the goods and services tax 2-1 2-1
description
CHAPTER 2 Source documents and goods and services tax. Learning outcome To understand the different types of source documents and the operation of the goods and services tax. 2-1. KEY TERMS. Australian Business Number Business Activity Statement Goods and services tax GST clearing - PowerPoint PPT Presentation
Transcript of CHAPTER 2 Source documents and goods and services tax
PPTs to accompany Accounting and Bookkeeping: Principles & Practice by AAT and David Willis 2011 McGraw-Hill Australia Pty Ltd
CHAPTER 2 Source documents and goods and services tax
Learning outcome
To understand the different types of source documents and the operation of the goods and
services tax
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PPTs to accompany Accounting and Bookkeeping: Principles & Practice by AAT and David Willis 2011 McGraw-Hill Australia Pty Ltd
KEY TERMS
• Australian Business Number• Business Activity Statement• Goods and services tax• GST clearing• GST-free supplies• GST input tax credits
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PPTs to accompany Accounting and Bookkeeping: Principles & Practice by AAT and David Willis 2011 McGraw-Hill Australia Pty Ltd
KEY TERMS cont.• GST collected• Inventories• Instalment Activity Statement• Pay-as-you-go withholding tax• Source documents• Tax invoice
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PPTs to accompany Accounting and Bookkeeping: Principles & Practice by AAT and David Willis 2011 McGraw-Hill Australia Pty Ltd
SOURCE DOCUMENTS Source documents that generate accounting entries
– Sales invoices
– Receipts/Cash register tape
– Purchase invoices
– Cheques
– Adjustment notes
– Memoranda
– Electronic transfers
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PPTs to accompany Accounting and Bookkeeping: Principles & Practice by AAT and David Willis 2011 McGraw-Hill Australia Pty Ltd
SOURCE DOCUMENTS cont.
Documents that back up (substantiate) accounting entries
– Sales and purchase orders
– Delivery dockets
– Bank deposit books
– Petty cash dockets
– Account statements
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PPTs to accompany Accounting and Bookkeeping: Principles & Practice by AAT and David Willis 2011 McGraw-Hill Australia Pty Ltd
GST• Tax on goods and services consumed in
Australia• Buyer/Consumer (non- business) bears cost of
GST• Businesses act as collecting agents for ATO
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PPTs to accompany Accounting and Bookkeeping: Principles & Practice by AAT and David Willis 2011 McGraw-Hill Australia Pty Ltd
GST cont.
• GST-registered businesses entitled to input tax credits
• GST not applied to employees’ wages
• GST applied to contractor payments
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PPTs to accompany Accounting and Bookkeeping: Principles & Practice by AAT and David Willis 2011 McGraw-Hill Australia Pty Ltd PPTs to accompany Accounting and Bookkeeping Principles by AAT and David Willis 2011 McGraw-Hill Australia Pty Ltd
REGISTRATION• If annual turnover is $75 000 or more, businesses are required to
register for:– an ABN
– GST
• Businesses not registered for GST do not charge GST and cannot claim input tax credits
• Businesses without an ABN may have 48.5% tax deducted from payment for goods and services they provide
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PPTs to accompany Accounting and Bookkeeping: Principles & Practice by AAT and David Willis 2011 McGraw-Hill Australia Pty Ltd
TAX INVOICES• Tax invoices must be provided to businesses for goods and
services provided for $50 or more• Adjustment invoices (credit notes) must be provided for refunds or
returns of $50 or more• Information on tax invoice must include:
– supplier’s ABN
– supplier’s name
– customer’s name and address
– date of issue
– description of goods and services provided
– details of price and GST-inclusive amount
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PPTs to accompany Accounting and Bookkeeping: Principles & Practice by AAT and David Willis 2011 McGraw-Hill Australia Pty Ltd
WHAT IS SUBJECT TO GST?• Most goods and services provided by GST-registered
businesses
• Some goods and services ‘input taxed’ (e.g. most financial services and residential rents)
• Some goods and services ‘GST- free’ (e.g. most foods and school fees)
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PPTs to accompany Accounting and Bookkeeping: Principles & Practice by AAT and David Willis 2011 McGraw-Hill Australia Pty Ltd
INPUT TAX CREDITS• Available when businesses pay GST on goods and
services used to operate the business
• Not available on ‘input taxed’ goods and services
• Not available unless registered for GST
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PPTs to accompany Accounting and Bookkeeping: Principles & Practice by AAT and David Willis 2011 McGraw-Hill Australia Pty Ltd
GST INPUT TAX CREDITS
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PPTs to accompany Accounting and Bookkeeping: Principles & Practice by AAT and David Willis 2011 McGraw-Hill Australia Pty Ltd
GST COLLECTED
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PPTs to accompany Accounting and Bookkeeping: Principles & Practice by AAT and David Willis 2011 McGraw-Hill Australia Pty Ltd
GST CLEARING
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PPTs to accompany Accounting and Bookkeeping: Principles & Practice by AAT and David Willis 2011 McGraw-Hill Australia Pty Ltd
Activity statement $
GST on sales 20less input tax credit --
GST payable 20
AUSTRALIAN
TAX
OFFICE
Activity statement $
GST on sales 94less input tax credit 50
GST payable 44
Activity statement $
GST on sales 50less input tax credit 20
GST payable 30
A timber merchant sells wood to a furniture manufacturer for $200 + 10% GST ($20):
The furniture manufacturer sells a dining room suite to a retailer for $500 + 10% GST ($50):
The retailer sells the dining room suite to a customer for $940 + 10% GST ($94):
$20
$30
$44
GST IN MANUFACTURING
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