Question 1

Explain why:

(a) when a business pays GST on the purchase of goods or services it records this as a GST Receivable, an asset

(b) When a business sells goods or services it records the GST component of the transaction as GST Payable, a liability.

Question 2

The following transactions occurred during the month of June:

• On 19 June 2019, Megan performed management services for a client. A fee of $10,800 was receivable, plus GST of $1,080.

• On 22 June 2019, she paid salaries of $7,600 to the office assistant and other employees for services rendered during the last two weeks.

• On 23 June 2019, Megan withdrew $1,200 cash from the business bank account for her personal use.

• On 30 June 2019, she paid the months telephone bill of $160 plus $16 for GST.

• On the same day, an amount of $9,240 was received for management services rendered.

REQUIRED:Prepare the general journal entries to record the transactions.