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i don't understand this debit/credit transaction stuff..please help?
i dont understand this example... (GST is goods and service tax which is 10% on top of sales..)
Goodman Fielder sold oils and fats to customers for cash and received $39 600 in total. in addition, the company charged $30 000 (GST excl.) for breads sold to supermarkets, receiving $21 000 cash with the rest due on account.
now i understand that cash would increase ($39 600 + 21 000)
but i don't understand the rest because of the GST stuff.. can someone please expain it to me?
1 Answer
- MarcLv 71 decade agoFavorite Answer
Since they have to charge 10% GST on the sales, the final price will be 110% of the pre GST amount. That amount (the pre GST amount) will be the sales revenue.
In the first example, the $39,600 was 110% of the amount sold. 39,600 / 1.10 = 36,000
So the entry for this one would be
Debit Cash $39,600
Credit GST Payable $3,600
Credit Sales Revenue $36,000
In the second example, the $30,000 was the sales price before they charges the 10% GST. So the entry for that one would be:
Debit Cash $21,000
Debit Accounts Receivable $12,000 ($33,000 = $21,000)
Credit GST Payable $3,000 (10% X $30,000)
Credit Sales Revenue $30,000
Source(s): 35 years of accounting experience