GST on Deposit?

[soldier_on16]

I've found two conflicting VCAA answers in the 09 and 08 exam. Both deal with a deposit and an invoice made afterwards, there are two conflicting ways of alloacting GST. One only calculates GST for the CREDIT invoice, where as one calculates GST for both the credit sale AND the deposit (prepaid revenue) once it has been earned.

WHICH method do I employ when calculating GST? Both transactions are the same, just with different values (different Q different business).

2008 2.3.2
2009 1.5.3

[24309]

Does it specify in the question if any GST was paid in the deposit?

[soldier_on16]

Nope, it simply gives you a situation coupled with transactions/events where you have to enter them in the correct journals and make BDA's if necessary.
But there is NO GST on receiving the deposit, it's only when the sale revenue is EARNED (i.e debit prepaid sales) in which one of the suggested solutions takes count for in it's GST calculation.

[24309]

hm im not too sure then. Unless it specifies in the question if a  portion of the GST was paid when the deposit was made.......i would just assume the deposit relates all to the sales price of the stock and the GST is paid in total after. But if they've used both ways then they should accept both....just depends if they tell you in the question or not?

[soldier_on16]

I'm pretty sure practice exams I've done incoperate both the deposit once it is earned and the credit sale in the GST calculation. I'm sticking with that.
But I if anybody could clarify specfically that'd be great

[AT]

Looking at both exams, isn't the difference in the way the GST is recorded purely based on the units we are accounting for. In the 2008 exam only 15 units of the 20 were delivered, yet in the 2009 exam question referred to the entire delivery. But in any instance the total GST on the sale is recorded.

In the first image, the GST is 10% of the Sales column of 5500 because the question asked about after all the deliveries were made. The second image shows 250 GST which is the total GST charged, yet only 2300 of the sales revenue is recorded in the SJ since the other 200 is in the GJ as credit to sales revenue.

I may be entirely off track here, but hope that somewhat helps...if it makes sense. 

I had immense trouble with this in this years SAC, but I figured out how to do it today and that's how I understand the difference in this particular scenario.

EDIT: Oh I think I see what you're talking about. I don't think I associate the GST with the deposit the way I do it. It's pretty complicated though, I have no idea how they would treat it in a real life scenario.

[soldier_on16]

Mm, I'm still unsure, though VCE scenarios and real life scenarios are two COMPLETELY different worlds Letting real life interfere with vce may hinder my atar!

But still, quite unsure! :S ARGH. Anybody else like to clarify?

[soccerboi]

I think the gst on the deposit should be considered. whenever a sales occurs gst comes with it, so in the 2008 exam, $200 of the gst component is missing, where else could it hav gone? So yeh i think it should be recorded, the 2009 exam solutions should be more correct.

[fuzzykeeghan]

Removing the GST on receipt of the deposit will result in the same value in the balance sheet as if you were to wait and recognise it in the sales journal.

Couldn't you just do it on a logical basis? A figure like $2200 can be logically divided to $2000 deposit and $200 GST clearing, but a deposit of $1000 would go to a decimal place when trying to calculate GST, so it would be easier to just remove the GST in the sales journal.

[chelseaFC]

If the question states 'a 20% deposit' was made. Wouldn't you total up the sales, add the gst and take 20% of that? That's how I have seen it in practice exams.

[soldier_on16]

Yeah, but in the two solutions they both employ different methods of answering the question which results in different answers! The confusion is which one do we use. I'm pretty sure you do include GST on the deposit once revenue is earned, I'm pretty sure that's how you're supposed to do it.

[nacho]

unless they specifically state "GST included"
it is not included in the deposit, ever.
my own reasoning is this -
GST only takes place when the transaction does-
a deposit is a sign of prepaid revenue, meaning revenue has not been earned so a sale has not taken place.

[24309]

unless they specifically state "GST included"
it is not included in the deposit, ever.
my own reasoning is this -
GST only takes place when the transaction does-
a deposit is a sign of prepaid revenue, meaning revenue has not been earned so a sale has not taken place.

agree with this

[chelseaFC]

unless they specifically state "GST included"
it is not included in the deposit, ever.
my own reasoning is this -
GST only takes place when the transaction does-
a deposit is a sign of prepaid revenue, meaning revenue has not been earned so a sale has not taken place.

But when one makes a percentage deposit, its on the entire amount owed which is inclusive of GST no?

[soldier_on16]

unless they specifically state "GST included"
it is not included in the deposit, ever.
my own reasoning is this -
GST only takes place when the transaction does-
a deposit is a sign of prepaid revenue, meaning revenue has not been earned so a sale has not taken place.

So even once they EARN the revenue when providing goods that were prepaid by the deposit, you wouldn't consider GST as part of the invoice?