Week 3

Question 1

GST

Answer 1

GST rate is 10%
All supplies of goods and services are subject to GST unless they are non-taxable
GST-free supplies
fresh food; education courses; wages etc.
GST is designed to be collected by businesses but eventually paid by consumers

Question 2

GST in business

Answer 2

Businesses are also charged GST on goods and services they purchase
However, businesses can claim this back from the government.
A business with an annual turnover of more than $75,000 is required to register and receive Australian Business Number( ABN).
ABN is also the GST registration number

Question 3

2 accounts for GST

Answer 3

GST Receivable

GST Payable

Question 4

GST Inclusive

Answer 4

means the price given for a product includes the GST component

Question 5

GST exclusive

Answer 5

• means the price given for a product has not had the GST component added.

Question 6

GST Receivable

Answer 6

to be claimed from Australian Taxation Office(ATO). GST Receivable can be claimed back from ATO and are therefore an Current asset

Question 7

GST Payable

Answer 7

• GST Charged on Sales

- To be returned to ATO. GST Payable must be remitted to the ATO hence are a Current liability

Question 8

General journal

Answer 8

General journal is where transactions are first recorded into the accounting system.

Question 9

General journal has the following advantages:

Answer 9

Complete record of all transactions
Presented in chronological order
Useful for locating and reducing errors as debits and credits shown together

Question 10

General ledger

Answer 10

A ledger is a collection of accounts and their balances.
Companies have various types of ledgers containing different accounts, but the most basic type is the general ledger.
The general ledger is really nothing more than a collection of T-accounts, which means that it contains both the activity and balances of all company accounts.

Question 11

A Trial Balance serves several functions:

Answer 11

It proves that total debit balances equal total credit balances. If they are unequal, then the accounting equation is out of balance!

It summarises all accounts of an entity and their respective balances.

Financial statements are prepared from its balances.

It is helpful in making any necessary adjustments to account balances at the end of an accounting period.

Question 12

Limitations of the Trial Balance

Answer 12

Trial balance may balance but still contain errors

If it doesn’t balance there is definitely an error but it doesn’t tell you what the error is

Question 13

Trial balance errors

Answer 13

Omission of an entry

Posting the entry in correct side but to a wrong account

Entered wrong amount

Question 14

Trial balance

Answer 14

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