The document discusses the GST clearing account, emphasizing that it is always considered a liability. It explains how businesses track GST transactions, including collections and payments, using various journals such as cash receipts, sales, cash payments, and purchases. Additionally, it includes examples of journal entries and discusses the accounting implications of GST clearing on a balance sheet.

1. 8.2
THE GST CLEARING
ACCOUNT

2. © Michael Allison. Author’s permission required for external use.
 The GST transactions of the firm are posted to the GST ledger…
 From now on, GST transactions are going to be posted to the GST Clearing
ledger…
8.2 THE GST CLEARING ACCOUNT
GST [L]
GST Clearing [L]

3. © Michael Allison. Author’s permission required for external use.
 The GST Clearing account is always assumed to be a Liability…
GST Clearing [L]
8.2 THE GST CLEARING ACCOUNT
Debit Credit
Liabilities  
Debit Credit
Liabilities  
Debit Credit
Liabilities  

4. © Michael Allison. Author’s permission required for external use.
 How does a business know how much:
 GST it has collected and charged
 GST it has paid and been charged
Special Journals
Cash Receipts Journal
Records all cash received by the
firm
Cash Payments Journal
Records all cash paid by the
firm
Sales Journal
Records all credit sales made
by the firm
Purchases Journal
Records all credit purchases of
stock
8.2 THE GST CLEARING ACCOUNT

5. © Michael Allison. Author’s permission required for external use.
Cash Receipts Journal
Date Details Receipt
Number
Bank Discount
Expense
Debtors
Control
Cost of
Sales
Sales Sundries GST
Jan 31 Total receipts 10100 2000 4000 7000 900 700
Sales Journal
Date Debtor Invoice
Number
Cost of Sales Sales GST Debtors
Control
Jan 31 Totals 2500 4000 400 4400
GST Liability [L]
Collect/charge GST
GST Liability

700
400
$1,100
8.2 THE GST CLEARING ACCOUNT

6. © Michael Allison. Author’s permission required for external use.
Cash Receipts Journal
Date Details Receipt
Number
Bank Discount
Expense
Debtors
Control
Cost of
Sales
Sales Sundries GST
Jan 31 Total receipts 10100 2000 4000 7000 900 700
Sales Journal
Date Debtor Invoice
Number
Cost of Sales Sales GST Debtors
Control
Jan 31 Totals 2500 4000 400 4400
8.2 THE GST CLEARING ACCOUNT
Cash at Bank [A]
31/1 GST clearing 700
GST Clearing [L]
31/1 Cash 700
31/1 Debtors control 400
Debtors Control [A]
31/1 GST clearing 400
Debit Credit
Assets  
Debit Credit
Assets  
Debit Credit
Liabilities  
Cash Receipts Journal
Date Details Receipt
Number
Bank Discount
Expense
Debtors
Control
Cost of
Sales
Sales Sundries GST
Jan 31 Total receipts 10100 2000 4000 7000 900 700
GST Clearing [L]
31/1 Cash 700
31/1 Debtors control 400
Debit Credit
Liabilities  
Cash at Bank [A]
31/1 GST clearing 700
Debit Credit
Assets  
Sales Journal
Date Debtor Invoice
Number
Cost of Sales Sales GST Debtors
Control
Jan 31 Totals 2500 4000 400 4400
GST Clearing [L]
31/1 Cash 700
31/1 Debtors control 400
Debtors Control [A]
31/1 GST clearing 400
Debit Credit
Assets  

7. © Michael Allison. Author’s permission required for external use.
$1,100
GST Liability [L]
GST Liability

Pay/charged GST
Cash Payments Journal
Date Details Cheque
Number
Bank Discount
Revenue
Creditors
Control
Stock
Control
Wages Sundries GST
Jan 31 Totals 8300 100 2100 2000 3000 1000 300
Purchases Journal
Date Creditor Invoice
Number
Stock
Control
GST Creditors
Control
Jan 31 Totals 5000 500 5500
300500
$300
8.2 THE GST CLEARING ACCOUNT

8. © Michael Allison. Author’s permission required for external use.
Cash Payments Journal
Date Details Cheque
Number
Bank Discount
Revenue
Creditors
Control
Stock
Control
Wages Sundries GST
Jan 31 Totals 8300 100 2100 2000 3000 1000 300
Purchases Journal
Date Creditor Invoice
Number
Stock
Control
GST Creditors
Control
Jan 31 Totals 5000 500 5500
8.2 THE GST CLEARING ACCOUNT
Debit Credit
Liabilities  
Cash at Bank [A]
31/1 GST clearing 700 31/1 GST clearing 300
Debit Credit
Assets  
GST Clearing [L]
31/1 Cash 300 31/1 Cash 700
31/1 Creditors control 500 31/1 Debtors control 400
Creditors Control [L]
31/1 GST clearing 400 31/1 GST clearing 500
Debit Credit
Liabilities  
Cash Payments Journal
Date Details Cheque
Number
Bank Discount
Revenue
Creditors
Control
Stock
Control
Wages Sundries GST
Jan 31 Totals 8300 100 2100 2000 3000 1000 300
Debit Credit
Liabilities  
GST Clearing [L]
31/1 Cash 300 31/1 Cash 700
31/1 Creditors control 500 31/1 Debtors control 400
Cash at Bank [A]
31/1 GST clearing 700 31/1 GST clearing 300
Debit Credit
Assets  
Purchases Journal
Date Creditor Invoice
Number
Stock
Control
GST Creditors
Control
Jan 31 Totals 5000 500 5500
Creditors Control [L]
31/1 GST clearing 400 31/1 GST clearing 500
Debit Credit
Liabilities  
GST Clearing [L]
31/1 Cash 300 31/1 Cash 700
31/1 Creditors control 500 31/1 Debtors control 400

9. © Michael Allison. Author’s permission required for external use.
 Does this firm have a GST Asset or Liability?
GST Clearing [L]
31 Jan Cash 300 31 Jan Cash 700
31 Jan Creditors control 500 31 Jan Debtors control 400
GST Clearing [L]
31 Jan Cash 300 31 Jan Cash 700
31 Jan Creditors control 500 31 Jan Debtors control 400
1100
GST Clearing [L]
31 Jan Cash 300 31 Jan Cash 700
31 Jan Creditors control 500 31 Jan Debtors control 400
1100 1100
GST Clearing [L]
31 Jan Cash 300 31 Jan Cash 700
31 Jan Creditors control 500 31 Jan Debtors control 400
31 Jan Balance 300
1100 1100
GST Clearing [L]
31 Jan Cash 300 31 Jan Cash 700
31 Jan Creditors control 500 31 Jan Debtors control 400
31 Jan Balance 300
1100 1100
1 Feb Balance 300
Balance Sheet as at 31 December 2015
Current Assets $ $ Current Liabilities $ $
GST Liability 400
Balance Sheet as at 31 December 2015
Current Assets $ $ Current Liabilities $ $
GST Clearing 300
Business Government
$300
Listed as “GST Clearing” in the
Balance Sheet, not “GST Liability”
8.2 THE GST CLEARING ACCOUNT

10. © Michael Allison. Author’s permission required for external use.
 Does this firm have a GST Asset or Liability?
GST Clearing [L]
31 Jan Cash 1000 31 Jan Cash 600
31 Jan Creditors control 400 31 Jan Debtors control 300
Balance Sheet as at 31 December 2015
Current Assets $ $ Current Liabilities $ $
GST Clearing 300
GST Clearing [L]
31 Jan Cash 1000 31 Jan Cash 600
31 Jan Creditors control 400 31 Jan Debtors control 300
1400
GST Clearing [L]
31 Jan Cash 1000 31 Jan Cash 600
31 Jan Creditors control 400 31 Jan Debtors control 300
1400 1400
GST Clearing [L]
31 Jan Cash 1000 31 Jan Cash 600
31 Jan Creditors control 400 31 Jan Debtors control 300
31 Jan Balance 500
1400 1400
GST Clearing [L]
31 Jan Cash 1000 31 Jan Cash 600
31 Jan Creditors control 400 31 Jan Debtors control 300
31 Jan Balance 500
1400 1400
1 Feb Balance 500
Balance Sheet as at 31 December 2015
Current Assets $ $ Current Liabilities $ $
GST Clearing 500 GST Clearing 300
Listed as “GST Clearing” in the
Balance Sheet, not “GST Asset”
Business Government
$500
8.2 THE GST CLEARING ACCOUNT

11. © Michael Allison. Author’s permission required for external use.
GST Clearing [L]
Cash Receipts Journal
Sales Journal
Cash Payments Journal
Purchases Journal
8.2 THE GST CLEARING ACCOUNT
Debit Credit
Liabilities  

12. © Michael Allison. Author’s permission required for external use.
TASK
In-class Homework
Ex8.1 X
Ex8.2 X
Ex8.3 X
Ex8.4 X
Ex8.5 X
Ex8.6 X
Ex8.7 X