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Accounting for GST - Cash Discount and Final Settlement Cases
Accountancy
Sir, in the above journal entry for Jul 4 and 5, we had recorded the lower amount paid by Surjeet as Discount allowed (loss) and we had not reversed GST as you had taught us the logic there is no change in the value of goods so not to reverse the Output GST a/c. Now my query is, in the books of Surjeet, he would have recorded the purchases (25K) and input GST a/c (3K), when he pays a final settlement. Asset goes down (so cr.) To Bank 25,200, liable to pay decrease (so dr.) Creditor 28K. Now the difference amount, 28,000 - 25,200 = 2,800, will surjeet record as discount received (gains)? He should not reverse the input GST a/c as the same logic, there is no change in value of goods. Hence reversal not required [Video Time Stamp: 00:02] Video Details ------------- Accounting - CA Foundation (New) Accounting for GST #6. Illustration 2
Answers (1)
Input and output GST go hand in hand. If supplier has charged GST - it is output and corresponding input for buyer. For discounts given (which are not agreed at time of sale) - there is no reversal of GST. But say if there is a volume discount agreed at time of sale - the supplier reverses output gst and customer reverses input gst. This is done by way of credit note issued by supplier. These are slightly advanced concepts and are covered in GST in CA inter.
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