Delayed GST or VAT.

Revenue is recognised on the profit and loss / income statement, but GST (or VAT) is required to be recognised only in the month in which the cash is received.

Answer:

 

This is accomplished by going to the Account, then to the Account property page.

Automatic GST / Automatic VAT / Automatic SALES TAX - normally this box is checked. Most users will never change this setting. In this case we want to enter the GST / VAT / SALES TAX amounts manually, so uncheck this box. See picture:

When Automatic GST or VAT is turned off, the GST / VAT will not be added automatically. Instead, the Budget per period page will display an extra column for entering the GST / VAT / SALES TAX amount yourself. See marker 4 is picture:

 

GST amount or VAT amount or Sales Tax amount - this column is normally not shown. The only circumstance in which it appears in the grid on the Budget per period page is if the user unchecked the Automatic GST/VAT/SALES TAX checkbox on the Account properties page.

The picture is now explained using the markers 1 to 4:

 

    • An amount of 10,000 is recognised as revenue in period 6.
    • Notice the P. The 'P' is used when you want the cash flow to be received in a Nominated period. Note: we are using the P option here because it clearly explains the process, and is often useful when entering the GST or VAT manually.
    • The Nominated period is shown in the To column. In the example, 10,000 of revenue recognised as income in period 6 will be paid in period 8. So 10,000 cash will be collected in period 8.
    • THE GST or VAT amount is shown in period 8. So the GST (or VAT) of 1,000 is charged in period 8.

     

Note: The usual sales profile could also have been used ("-") to show when the income is recognised. The GST or VAT would still have been entered into the column as shown in 4.

 

Here are the results for this example:

Profit and loss / income statement:

 

The 10,000 is recognised as income in period 6.

 

Cash Flow:

 

In period 8 the income of 10,000 plus the 1,000 GST or VAT is received. Total 11,000.

 

In period 9 the GST or VAT is sent off to the tax office.

 

Balance sheet

 

Cash at bank

 

The 10,000 is shown as A/R on the Balance sheet, and stays there until paid in period 8.

 

Cash at bank is 11,000 in period 8, and this reduced in period 9 by the 1,000 GST or VAT sent to the tax office.