Hi
We have recently changed from accounting for our local government, with a local GST of 12%, to now coming under the ATO, but we are not required to pay or charge GST for goods and services, both purchased locally or from mainland Australia, or charge GST on services provided.
Problem is I did have some outstanding accounts receivable with GST, and accounts payable with no GST.
Because the GST collected will belong to the local government, and will not be an expense in this years figures, how do I allocate this GST collected when the customer pays into my bank account, which is the same one used before, and how do I allocate the payment from my cheque account to the local government.
I am now using accrual, but previously was using cash. The GST therefore was not included in any previous returns. It is only starting this financial year that we are going to pay tax, and the ATO recognise that previous earnings will not be included in this tax year, but of course my bank statements show this money coming in over the last two months.
Just to add for the last two months we have submitted GST returns for outstanding accounts to the local government. These also show on my bank statement, and am not sure if I allocate to owners draw, but that then also comes into play for a tax return.
If under the Summary tab Set Period you changed from Cash to Accrual and you also ticked the Show Balances box and set the From date to July 1 then all unpaid Invoices should have put their GST portion into the tax liability account, so all you need to do is pay that balance.
Let say that the account balance at Jun 30 was 1000 based on cash basis and that was also the return payment value and there were also unpaid invoices which included 500 worth of GST.
When you switched to accrual basis, that outstanding 500 should now be included as part of an adjusted Jun 30 tax account balance. Therefore any balance after the 1000 payment remains as unpaid to local government. Any money received would just be settlement of the Accounts Receivable balance so no other action required
Problem is I decided to start over with a new business as of July 1st, which is why I was hoping Lubos was going to come up with the PURGE button, but that did not happen, and I understand there was the problem that it could cause a disaster.
So basically what I did was set my date to 30/6/2016, and enter all those outstanding invoices which included the local GST, and purchases as of that date, then changed the date back to July 1st.
I am just trying to get my head around those deposits into my bank account and the withdrawals out of my bank account for these. So I receive for example a deposit on the 10th July of $224.00, which is $200.00 for the job shall we say invoiced in June, plus the GST of $24.00.
The $24.00 belongs to the local government, and the $200.00 would normally go to Sales. But that was under my old system of cash accounting.
Maybe I just throw it to the accountant and get him to work it out.
The situation described in your last post, @norfolkislandam, is actually quite simple. (I am not giving opinions or ideas about anything previously discussed.)
In effect, you are making a transition to Manager from another business. So begin a completely new set of accounts with a Start Date of July 1, 2016. Set up your chart of accounts, and as you do so, enter any carryover balances for any of your balance sheet accounts, such as fixed assets and cash accounts. Ignore income and expense accounts for the purpose of starting balances.
The only balance sheet accounts you do not follow this procedure for are Accounts receivable and Accounts payable. For those two, you must enter any sales or purchase invoices that have not been completely paid. Enter the balance remaining due and the actual issue dates, which will predate your Start Date. Manager picks up pre-Start Date invoices as the only things that are not ignored that occurred prior to the Start Date. It does not recognize them as income expenses, though, because their revenue or expense would have been recognized prior to the new business’ beginning. This procedure categorizes them as assets (A/R) or liabilities (A/P). When you enter receipts or payments against those invoices, all you will be doing is transferring money in or out of a cash account to clear A/R or A/P. Nothing will appear on your P&L as income or expense.
In the case of taxes that were on those pre-Start Date sales invoices, the sum of these will be entered as the opening balance of your Tax payable account. When you remit the tax to the government, you will just be clearing that liability. Again, it was actually traceable to the period before your “new” company started operation.
In the case of cash transactions involving taxes after your new Start Date that are for your old cash-accounting period, you may need journal transactions to rectify things. In my experience, there may be some elaborate filings to make as a result of switching from cash to accrual accounting. These typically involve adjustments to be sure the tax authority gets its due, no matter what. This is what should be discussed with your accountant. You may, in fact, need explicit permission from your tax authority to make such a change. The Manager part is relatively easy.
If you are now saying that you started with a new business, then in the old business converted it to Accrual Basis, so that you can get the correct balances to transfer into the new business which will be Accrual Basis.
That way the old at Jun 30 exactly matches the new at Jul 1 otherwise you are attempting to convert cash basis transactions within accrual basis accounting by manipulating the transaction
By exactly matching the opening/closing balances then you don’t have to concern yourself with the Receive/Spend Money transaction with regards to GST as that was sorted out within the opening balances
Also, you should only set Start Date as Jul 1 - not Jun 30 then change to Jul 1, as the same business can’t have two start dates. Manager will handle every thing correctly