Question

Surfs Up P/L is a national retailer that sells a range of surfing and water sports equipment (surfboards, clothing, etc.) with an annual turnover of $60 million. Surfs Up purchases “Billapro” surfboards for $440 each from Billapong P/L, a large manufacturer of surfboards located at Gold Coast with an annual turnover of around $45 million, this was their only sale for the month. Surfs Up plans to sell the Surfboards at a 200% mark-up to its customers. In October last year it purchased 370 surfboards but a couple of months later (December) they discovered that 14 of the surfboards were faulty and subsequently returned these faulty surfboards to the manufacturer, obtaining a full refund. Assume both apply the accrual method of accounting.

Need detail information of below points:

1) To they have to register GST or not ? why

2) In this case do they use Accural Method or Cash Method

3) Do they need to logged monthly or Quarterly ( reason behind this)

4) increase or decreased the adjustments

Please provide more details

Answer 1

Answers :

1. They must register GST (Goods and Service Tax) because a business engaged in exlusive supply of goods whose aggregate turnover crosses Rs: 40 lacks in year is require to register GST.

2. In this case do they use Accural Method.It records both cash and credit transactions and also follows international accounting standards. Accural method is widely used It ensures the company’s both cash flows and accrual flows. & completely presents the company’s overall financial changes over a specific period.

3. Tax payers annual aggregate turnover up to Rs 1.5 crore in the previous year can available of the option for filing quaterly return. But this business have morethan 1.5 crore so they have to logged to Monthly.

4. The adjustments will increase for sure! Adjustment entries are maily deal with revenue and expenses. in this business we can take example of turnover first of all. thus every adjustment entries atleast one income statement and one balance sheet account.

Please dont forget to UPVOTE and pls comment here if you have any doubt!

thank you.. :)