Study Design- accrued expenses

[elaine]

I'm a bit confused about this aspect of the study design:

– accrued expenses (GST to be recorded at time of payment);

So does that mean in the Cash Payments journal, instead of recording one figure in the sundries column, I have to split it up as GST and sundries?

I think my neap or textbook only puts one figure for payment of accrued expenses, there isn't anything in the GST column.

and anyone else getting jittery about the exam?

[clinton_09]

I'm a bit confused about this aspect of the study design:

– accrued expenses (GST to be recorded at time of payment);

So does that mean in the Cash Payments journal, instead of recording one figure in the sundries column, I have to split it up as GST and sundries?

I think my neap or textbook only puts one figure for payment of accrued expenses, there isn't anything in the GST column.

and anyone else getting jittery about the exam?

jittery about the exam is exactly how i'm feeling im not confident at all. Oh well just gotta keep trying

[elaine]

hey guys can someone explain this to me?

At the 31st of March, Linday still owed a power & light account of $484, including GST of $44.

Lindy paid the power & light on the 5th April 2009. State the ledgers and the amounts that would be debited and credited as a result of this transaction.
The answer is:

Ledger
Accrued power & light  440 DR
GST Clearing               44 DR
Bank                           484 CR

I'm really confused. Why is GST in there? In all of my practice questions i've done, i haven't seen any GST recognised

[costargh]

Thats because most of the questions we are given are expenses which are not related to GST like wages and insurance (they don't incur the GST).

All this is saying is that if the expense we are dealing with includes GST, you have to break it up so that you recognise that GST is part of the answer... so it says "GST to be recorded at time of payment".

Im guessing this means that you don't recognise the GST in any balance day adjustments because it hasnt been paid yet so if you did a BDA for an expense with GST you would do it as normal, but when you actually record the transaction in the cash payments journal you have to seperate it so that you indicate the ammount that corresponds to the expense, the ammount corresponding to bank and the ammount correspnding to GST.

BUT NOW IM CONFUSED BECAUSE IM NOT SURE IF YOU WOULD INDICATE THE 484 AS THE ACCRUED POWER AND LIGHT OR 440 .... shit now im confused lol

[elaine]

i've emailed my teacher about so hopefully he gets back to me soon

[ben4386]

methinks you would treat it the same way as debtors control,

i.e. when you record a credit sale you record the sale and the GST component in the sales journal and then when your payed back at a later date you record pay the full amount but dont actually separate the GST

I would think it would also be like a sundry creditor, the difference being that a sundry creditor is to do with restructuring assets and liabilities, no owners equity would be involved so its not an expense

General journal entries should be like this

DR Power and light expense 440

DR GST clearing 44
Accrued Power and Light Expense 484 CR

upon payment in the cash receipts journal it would be a sundry for accrued power and light for $484

Ledgers

Accrued Power and Light

Date Details Amount           Date      Details                                 Amount
                                                 Power and light expense/GST          484


GST Clearing
Date         Details                     Amount           Date  Details   Amount
          Accrued Power and Light    44


Power and Light expense

Date         Details                     Amount           Date  Details   Amount

             Accrued Power and Light 440

[costargh]

upon payment in the cash receipts journal it would be a sundry for accrued power and light for $484

Do you mean cash payments journal?

[elaine]

methinks you would treat it the same way as debtors control,

i.e. when you record a credit sale you record the sale and the GST component in the sales journal and then when your payed back at a later date you record pay the full amount but dont actually separate the GST

I would think it would also be like a sundry creditor, the difference being that a sundry creditor is to do with restructuring assets and liabilities, no owners equity would be involved so its not an expense

General journal entries should be like this

DR Power and light expense 440

DR GST clearing 44
Accrued Power and Light Expense 484 CR

upon payment in the cash receipts journal it would be a sundry for accrued power and light for $484

Ledgers

Accrued Power and Light

Date Details Amount           Date      Details                                 Amount
                                                 Power and light expense/GST          484


GST Clearing
Date         Details                     Amount           Date  Details   Amount
          Accrued Power and Light    44


Power and Light expense

Date         Details                     Amount           Date  Details   Amount

             Accrued Power and Light 440

methinks you're a genius

with the general ledgers- does the bank ledger come into it?

thanks again ben

[ben4386]

bank ledger would certainly come into it on the date of payment

                                  Bank

Date Details Amount           Date                                       Details                                 Amount
                                        end of reporting period                Payments                         ($X including the $484)


Accrued Power and Light expense


Date                                       Details             Amount           Date    Details         Amount

end of reporting period             Bank                  $484


Funnily enough I just came across a question like this in the A+ Exam

On the 28/2/14 River Fishing specialists owed $440 which include $40 GST, On 5/3/14 the business paid the advertising owing

2.2.1: Which accounts are debited and credited on 5/3/14 and what is the value of those debits and credits

Answer: debit Advertising $400, GST Clearing $40
credit Bank 440,                     

Ive got a few problems with this answer
1. Why are they debiting advertising and not accrued advertising
2. Why have they said "Which accounts are debited and credited on 5/3/14 " in the question, you only debit and credit accounts in the general ledger at the start and end of the reporting period
3. The whole point of this thread is to known how to record such transactions, I still believe you recognise the GST at the time that the transaction occurs, like debtors and sundry creditors, and the amount you pay is a sundry, I may indeed be wrong but if you record the GST at the time that you pay for it seperately in the GST column then you are adding to the GST paid during this reporting period, when clearly the GST was paid for last reporting period (on credit, think of how debtors and creditors control works, you don't include GST seperately when you receive cash from debtors or pay creditors with cash).

I appreciate any other input

ben


     

[elaine]

ok i got a reply from my teacher:

"Hi Elaine,
 
You would just record the GST in the Cash Payments Journal at the time of payment. The Accrued Expense excludes the GST though."

hmmm.

[elaine]

bank ledger would certainly come into it on the date of payment

                                  Bank

Date Details Amount           Date                                       Details                                 Amount
                                        end of reporting period                Payments                         ($X including the $484)


Accrued Power and Light expense


Date                                       Details             Amount           Date    Details         Amount

end of reporting period             Bank                  $484

    

is it supposed to be a debit of 440 to Accrued advertising right?
and then a debit of 44 to GST?

             

Ive got a few problems with this answer
1. Why are they debiting advertising and not accrued advertising
2. Why have they said "Which accounts are debited and credited on 5/3/14 " in the question, you only debit and credit accounts in the general ledger at the start and end of the reporting period

i'm pretty sure those are errors, A+ is a tad weird at times. not to mention the COMPLETE LACK OF SPACE they give you. seriously. a ledger entry can fit 'stoc...' and that's about it.

3. The whole point of this thread is to known how to record such transactions, I still believe you recognise the GST at the time that the transaction occurs, like debtors and sundry creditors, and the amount you pay is a sundry, I may indeed be wrong but if you record the GST at the time that you pay for it seperately in the GST column then you are adding to the GST paid during this reporting period, when clearly the GST was paid for last reporting period (on credit, think of how debtors and creditors control works, you don't include GST seperately when you receive cash from debtors or pay creditors with cash).

     

oo! i get it now, the GST is for the previous period and it would be irrelevant to record it in the GST column.
yay thanks

[gta007]

Just wanted to check on this, better safe than sorry.

Doing previous VCAA exams - they had questions like this:

Prepare the General Journal entries required to record the new valuation of buildings.

AFAIK it's not in the study design, though I haven't glanced through it thoroughly. Just want someone else's opinion. 

[gta007]

Oh since, I'm here, those POINT OF SALES/ POINT OF TRANSFER questions. Not included please!

[sheepz]

nah those arent in the course anymore =)