GST & Accounting - Concepts & Theory Flashcards
Historical Cost Principle
An asset is recorded as its purchased price - value does not change over time.
GST Payable
GST collected from customers to be paid to the ATO.
Accounting Entity Concept
Separates owner from the business for accounting purposes - owner’s personal actions are not recorded in the business’s accounting system.
What is a requirement for a taxable sale?
The sale must be made for payment and includes GST
Goods and Service Tax (GST)
A broad-based tax that is charged on most goods and services
GST Input Tax Credits
GST that can be claimed back from the ATO
What does the Going Concern Principle allow for business transactions?
Business transactions can be recorded over consecutive years.
Monetary Principle
All business transactions are measured in terms of money. All transactions are recorded in the same monetary unit (e.g. US$, AU$)
Principle of Materiality
Requires that all significant items be recorded in financial reports.
Accounting Period Concept
Breaks the life of the business into equal time periods, enabling comparison of data. An Income Statement is prepared for each period, and a balance sheet on the last day of the accounting period.
Supply
Occurs when goods are made available when services are performed
What are taxable supplies?
Sales of goods and services that must have GST included in their price
Business Activity Statement (BAS)
Used to report the business tax entitlements and obligations for a reporting period, including GST, PAYG instalments, PAYG withholding and fringe benefits tax instalments
When must a business include GST in their sales?
When the business is registered or required to be registered for GST
What is the Going Concern Principle?
A business will exist for a foreseeable future.
Australian Business Number (ABN)
A number that businesses must use so that the ATO can identify the business in all its dealings. An ABN is a single identifier used to register for GST, claim GST credits, register for PAYG withholding and interact with gov departments
What accounting method is associated with the Going Concern Principle?
Historical Cost.
What does the Going Concern Principle allow regarding asset valuation?
Assets can be valued at purchased price on a balance sheet.
Going Concern Principle
A business will exist for a foreseeable future. Allows assets to be valued at purchased price on a balance sheet - Historical Cost - and allows business transactions over consecutive years to be recorded
