Study Text page 149
I have posted the 12 month technical support to prepayments. Below this there is a paragraph that states “At the end of the GST Reporting period, a general journal entry can be recorded which takes the quarters portion of membership from Prepayment Subscriptions Asset account and allocate it to an Expense account called Subscriptions and Membership Fees and claim the amount of GST for the period”
Is the end of this statement correct? ie claim the amount of gst for the period journaled which would be 3mths worth.
My understanding is that on:
1) A cash basis – the full amount of GST would be claimed on the date the invoice was paid and any subsequent journal entries would be posted as N-T.
2) A accruals basis – the full amount of the GST would be claimed on the invoice date and again any subsequent journal entries would be posted as N-T
The above paragraph implies that the monthly / quaterly prepayment journal needs to account for the GST as an in and an out at every monthly / quaterly prepayment even though at the initial posting of the cost will show a net amount in the balance sheet prepayment account.
Questions in short –
1) Should journals prepaying costs be posted with the relevant GST code (GST, FRE) or is N-T the correct option
2) If posting with the relevant GST code is correct, would you treat accumulated depreciation the same (ie post the monthly depreciation journal with CAP in and out)
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