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Study Design- accrued expenses

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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:

--- Quote from: ben4386 on June 10, 2008, 02:17:48 pm ---upon payment in the cash receipts journal it would be a sundry for accrued power and light for $484


--- End quote ---

Do you mean cash payments journal?

elaine:

--- Quote from: ben4386 on June 10, 2008, 02:17:48 pm ---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


--- End quote ---

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.

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