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Offline LFTM

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GST in general journal
« on: June 08, 2010, 09:26:50 AM »
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one last thing guys, when do i include GST in the general journal?

For example in the 07 exam: A payment of $12 000 plus $1 200 GST for june, july and August's rent was incorrectly debited to the gst clearing account.

Answer:DR prepaid rent 12 000
           CR GST clearing 12 000


and in last years exam: A payment of an electricity bill, $250 plus $25 GSTwas incorrectly recorded as wages.

Answer:DR electricity expense 250
           DR GST clearing 25
           CR Wages expense $275

So how do you know when to include GST or not?

Offline mba

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Re: GST in general journal
« Reply #1 on: June 08, 2010, 09:36:49 AM »
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Well the only time you would really have to enter GST in the gen journal is for correcting errors if an alteration to GST is required or if there is a GST clearing balance when doing a commencing entry. The other uses of the general journal, correct me if I'm wrong will never have GST attached: Bad debts, contribution of NCA by owner, withdrawels of stock.

For a correcting entry I always write down what was meant to be entered and what has been entered. Then you can easily see what corrections you need to make, if the GST entry is incorrect then you would include this in your entry (like your example regarding electricity and wages).

For a commencing entry well that is pretty easy. It will tell you in the list of accounts if GST clearing is a CR or DR balance. You simply CR or DR this figure in the gen journal with all the other commencing entries.

I.e.: Jane contributed the following on the 1st of Jan to commence the double entry recording system:

Stock $50 000
Debtors $25 000
Loan - ABC Finance $10 000
GST Clearing $5000 DR

Gen Journal Entries:
Stock Control DR 50 000
Debtors Control DR 25 000
GST Clearing DR 5000
   Loan  - ABC Finance CR 10 000
   Capital - Jane CR 70 000

Hope this helps, MBA
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Offline LFTM

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Re: GST in general journal
« Reply #2 on: June 08, 2010, 09:51:09 AM »
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Well the only time you would really have to enter GST in the gen journal is for correcting errors if an alteration to GST is required or if there is a GST clearing balance when doing a commencing entry. The other uses of the general journal, correct me if I'm wrong will never have GST attached: Bad debts, contribution of NCA by owner, withdrawels of stock.

For a correcting entry I always write down what was meant to be entered and what has been entered. Then you can easily see what corrections you need to make, if the GST entry is incorrect then you would include this in your entry (like your example regarding electricity and wages).

For a commencing entry well that is pretty easy. It will tell you in the list of accounts if GST clearing is a CR or DR balance. You simply CR or DR this figure in the gen journal with all the other commencing entries.

I.e.: Jane contributed the following on the 1st of Jan to commence the double entry recording system:

Stock $50 000
Debtors $25 000
Loan - ABC Finance $10 000
GST Clearing $5000 DR

Gen Journal Entries:
Stock Control DR 50 000
Debtors Control DR 25 000
GST Clearing DR 5000
   Loan  - ABC Finance CR 10 000
   Capital - Jane CR 70 000

Hope this helps, MBA

But how about the first example? why didn't that include GST?

Offline aza22

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Re: GST in general journal
« Reply #3 on: June 08, 2010, 10:02:19 AM »
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Well the only time you would really have to enter GST in the gen journal is for correcting errors if an alteration to GST is required or if there is a GST clearing balance when doing a commencing entry. The other uses of the general journal, correct me if I'm wrong will never have GST attached: Bad debts, contribution of NCA by owner, withdrawels of stock.

For a correcting entry I always write down what was meant to be entered and what has been entered. Then you can easily see what corrections you need to make, if the GST entry is incorrect then you would include this in your entry (like your example regarding electricity and wages).

For a commencing entry well that is pretty easy. It will tell you in the list of accounts if GST clearing is a CR or DR balance. You simply CR or DR this figure in the gen journal with all the other commencing entries.

I.e.: Jane contributed the following on the 1st of Jan to commence the double entry recording system:

Stock $50 000
Debtors $25 000
Loan - ABC Finance $10 000
GST Clearing $5000 DR

Gen Journal Entries:
Stock Control DR 50 000
Debtors Control DR 25 000
GST Clearing DR 5000
   Loan  - ABC Finance CR 10 000
   Capital - Jane CR 70 000

Hope this helps, MBA

But how about the first example? why didn't that include GST?

The GST amount had already been added to the GST clearing account previously

Offline LFTM

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Re: GST in general journal
« Reply #4 on: June 08, 2010, 10:19:19 AM »
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Well the only time you would really have to enter GST in the gen journal is for correcting errors if an alteration to GST is required or if there is a GST clearing balance when doing a commencing entry. The other uses of the general journal, correct me if I'm wrong will never have GST attached: Bad debts, contribution of NCA by owner, withdrawels of stock.

For a correcting entry I always write down what was meant to be entered and what has been entered. Then you can easily see what corrections you need to make, if the GST entry is incorrect then you would include this in your entry (like your example regarding electricity and wages).

For a commencing entry well that is pretty easy. It will tell you in the list of accounts if GST clearing is a CR or DR balance. You simply CR or DR this figure in the gen journal with all the other commencing entries.

I.e.: Jane contributed the following on the 1st of Jan to commence the double entry recording system:

Stock $50 000
Debtors $25 000
Loan - ABC Finance $10 000
GST Clearing $5000 DR

Gen Journal Entries:
Stock Control DR 50 000
Debtors Control DR 25 000
GST Clearing DR 5000
   Loan  - ABC Finance CR 10 000
   Capital - Jane CR 70 000

Hope this helps, MBA

But how about the first example? why didn't that include GST?

The GST amount had already been added to the GST clearing account previously

ok. i think i get it..