GST Settlement Question - Help

[lmaoss]

I was going through the practice exams on VCAA site and was correcting one of the 2008 exams I had done and came across this question. I understand that it represents t the amount of GST that the business has paid on its cash purchases of stock/expenses/non-current assets and is an amount of GST owed by the ATO to the business from its cash purchases of stock/expenses/non-current assets which results in a decrease in the GST liability.

However, the VCAA report said that it couldn't be a GST settlement but didn't go into much explanation on why not. Would it be due to the amount being paid not being the resultant balance of the GST clearing account? Or could it be because GST is only paid at a certain date. I can only speculate but can someone explain why it can't be such to me?
Cheers.

[Damoz.G]

Hi lmaoss,

Usually, a GST Settlement would be the EXACT same figure as the opening balance for the Reporting Period. Now, it seems strange that there is no Opening Balance to begin with.

But If I got that as a stand alone question, I would have immediately thought GST Paid on Cash Purchases (of Stock, on Prepaid Expenses, etc.)

I can't find the Question in both VCAA 2008 Exams. Was it in Exam 1 or 2? I need to see the Question fully to be able to give you an explanation.

[abcdqd]

business started trading on jan 1. Since question reads "entries for the quarter", the reporting period is 3 months, so GST gets reported to the ATO for the first time at the end of march. therefore the business could not have had a GST settlement during that period.

[lmaoss]

Thanks abcdqd
So is GST only reported to the ATO at the end of the reporting period? If so, does that mean GST Settlement/Refund will only occur if the GST Clearing account has a balance carried over from a previous period?

[abcdqd]

yes

btw if anyone was wondering this is vcaa 2007 exam 1