Question

Q2. Flow GST and journal entries

A Timber merchant sells timber to a Furniture manufacturer for $220 (this amount include 10% GST). The furniture manufacturer then makes a table and sells it to Fantastic Furniture Ltd, a furniture retailer, for $440 (including GST). The retailer sells the table to a consumer for $550 (Including GST)

Required

1. Prepare journal entries for the flow of GST among businesses and the Australia Taxation Office

Answer 1

Particulars	Timber merchant	Furniture manufacturer	Retailer
Cost of timber	200	400	500
VAT	20	40	50
Total cost	220	440	550

Sr.no	Description	Dr	Cr
1	Cash	220
	Sales		200
	GST payable		20
	(Being sale of goods including GST by Timber Merchant to Furniture Manufacturer)
2	GST payable	20
	Bank		20
	(Being GST collected on sale by Timber merchant deposited with the authorities)
3	Purchases	200
	GST credit claimable	20
	Cash		220
	(Being purchase of furniture by Furniture manufacturer from Timber Merchant)
4	Cash	440
	Sales		400
	GST payable		40
	(Being sale of goods including GST by Furniture manufacturer to Furniture retailer)
5	GST payable	40
	GST credit claimable		20
	Bank		20
	(Being GST liability discharged after offsetting GST credit by Furniture manufacturer deposited with the authorities)
6	Purchases	400
	GST credit claimable	40
	Cash		440
	(Being purchase of furniture by Furniture retailer from Furniture wholesaler)
7	Cash	550
	Sales		500
	GST payable		50
	(Being sale of goods including GST by Furniture retailer to Consumer)
8	GST payable	50
	GST credit claimable		40
	Bank		10
	(Being GST liability discharged after offsetting GST credit by Furniture retailer deposited with the authorities)