2.6

GST AND THE INCOME

STATEMENT

Video of this presentation at…

YouTube Channel for VCE Accounting

© Michael Allison. Author’s permission required for external use.

2.6 GST AND THE INCOME STATEMENT

A business made a cash sale of $1,000 plus $100 GST

Why is the $100 GST not considered to be Revenue?

Assets LiabilitiesOwner’s

Equity= +

Cash

$100

GST Liability

$100

$100 $100 $0

Revenue definition…

• There is an inflow of economic benefits

• Assets or Liabilities

• Owner’s Equity

© Michael Allison. Author’s permission required for external use.

2.6 GST AND THE INCOME STATEMENT

A business made a credit sale of $1,400 plus $140 GST

Why is the $140 GST not considered to be Revenue?

Assets LiabilitiesOwner’s

Equity= +

Debtors

$140

GST Liability

$140

$140 $140 $0

Revenue definition…

• There is an inflow of economic benefits

• Assets or Liabilities

• Owner’s Equity

© Michael Allison. Author’s permission required for external use.

2.6 GST AND THE INCOME STATEMENT

A business paid $300 for electricity plus $30 GST

Why is the $30 GST not considered to be an Expense?

Assets LiabilitiesOwner’s

Equity= +

Cash

$30

GST Liability

$30

$30 $30 $0

Expense definition…

• There is an outflow of economic benefits

• Assets or Liabilities

• Owner’s Equity

© Michael Allison. Author’s permission required for external use.

2.6 GST AND THE INCOME STATEMENT

A business paid $900 for rent plus $90 GST

Why is the $90 GST not considered to be an Expense?

Assets LiabilitiesOwner’s

Equity= +

Creditors

$90

GST Liability

$90

$0 $0 $0

Expense definition…

• There is an outflow of economic benefits

• Assets or Liabilities

• Owner’s Equity

© Michael Allison. Author’s permission required for external use.

2.6 GST AND THE INCOME STATEMENT

Therefore, the following should NEVER be in the Income Statement…

GST collected from/charged from customers

GST paid to/charged by suppliers

Income Statement for 30 June 2015

Expenses $ $

GST paid 30

Rent 200

Insurance 100

Wages 500 830

Income Statement for 30 June 2015

Revenue $ $

Cash sales 600

Credit sales 300

Interest earned 50

GST collected 100 1050

Income Statement for 30 June 2015

Revenue $ $

Cash sales 600

Credit sales 300

Interest earned 50

GST collected 100 1050

Income Statement for 30 June 2015

Expenses $ $

GST paid 30

Rent 200

Insurance 100

Wages 500 830

© Michael Allison. Author’s permission required for external use.

TASK

In-class Homework

SQ3 X