Complete business activity and instalment activity statements in Australia

Cash or Accrual Accounting

In Australia, financial years run from 1 July to 30 June the following year

EXAMPLE

Reporting Periods - Cash or Accruals

Jenny is a country vet who is registered for GST. Brian owns a horse stud and is also registered for GST. One of Brian's prize horses falls ill on December 13 and requires Jenny's urgent veterinary attention. Jenny allows Brian 30 days to pay the invoice for her services. Brian pays this invoice on 10 January

In which quarter will Jenny and Brian record the GST impact of this transaction?

Solution:

• If Jenny reports GST on a cash basis, she will record her GST liability in the March quarter, as this is when she received payment from Brian.
• If Jenny reports GST on an accruals basis, she will record her GST liability in the December quarter, as this is when the transaction occurred and an invoice was raised
• If Brian reports GST on a cash basis, he will claim his GST input tax credit in the March quarter, as this is when he paid Jenny.
• If Brian reports GST on an accruals basis, he will claim his GST input tax credit in the December quarter, as this is when the transaction occurred and an invoice was

Q1. Chris is a tiler who buys some tiles from Tile Mart Pty Ltd on 23^rd September. Tile Mart provide commercial credit terms of 30 days from the date of invoice and Chris pays the invoice on 15^th October.

Required: in which quarter will Tile Mart and Chris record the impact of this transaction if they each used: (a) cash accounting, and (b) accrual accounting.

Tile Mart:

a) cash accounting

Tile Mart:

b) accrual accounting

Chris:

a) cash accounting

Chris:

b) accrual accounting