CH4 - Posting Transaction, Balancing Acc & The Trial Balance Flashcards
Output tax is charged on sales.
Treat as liability (bagi kat Govn)
Dr Cash/Receivables (Gross price)
Cr Sales ( price of the goods)
Cr Sales Tax
Input tax is incurred on purchases.
Treat as asset ( receive from Govn )
Dr Purchase ( price of the goods )
Dr Sales Tax ( asset )
Cr Cash/Payable ( we expected to pay to supplier )
Cash receipt in sales tax.
Is not relevant when calculating the sales tax balances.
Dr Cash
Cr Receivable Control Acc
Balances on sales tax account
Debit balances -receive from govn
( O < I )
Credit balances -pay to govn
( O > I )
Irrecoverable tax [ cost of purchase must include Tax ]
Tak registered for tax
Dr Purchase
Cr Payable
[The price + tax]
A valid reason for an accountant to close off the general ledger accounts and produce a trial balance
It will enable the accountant to establish whether or not the value of all the debits is equal to the value of all the credits before proceeding with the preparation of the final account.
Valid reasons for a business to register for sales tax in a country which permits voluntary registration?
Taxable sales exceed a limit for compulsory registration set by the tax authorities.
The business falls under any specified limits but makes standard rated supplies and is not charged input tax by its supplier.
What is a TRIAL BALANCE ?
A list of general ledger account balances which acts as a basic check on the accuracy of the bookkeping
General ledger
An accounting record which summarises the financial affairs of a business.
Impersonal accounts
Receivables & payables ledgers
Are used to keep track of individual customer and supplier balances.
They are personal accounts
These ledger are not part of the double entry system.
Known as memorandum accounts.
Sales tax
Gross price = net price + sales tax
Receivables & payables in the SOFP include sales tax.
Sales & purchases in SOPL excluded sale tax (unless it is irrecoverable)
Supplies of goods & services may be:
Outside the scope of VAT.
Exempt supplies.
Taxable supplies ( standard rate, zero rate or reduced rate)
Types of error will NOT be highlighted by a trial balance;
Comple omissions
Errors of commission
Compensating errors
Errors of principle
Posting incorrect amounts
Errors of original entry
Errors of reversal
