HST

HST Harmonized Sales Tax Combination of GST and PST – New effective July 1 2010 Complex!!! Lots of rules

HST Roles Roles of Seller Roles of Consumer Charges Collects Remits (send in collected taxes) to the Government Roles of Consumer Pays

New Accounts for GST/HST Both new accounts are liabilities GST/HST Payable Specific Accounts Payable to the Gov’t GST/HST Recoverable Considered a contra-liability (A liability account) Some of the HST paid by a business is eligible to be refunded. For our purposes, we will assume all HST from expenses is recoverable.

New Liability Accounts HST Payable HST Recoverable Liability “Bad thing” for a business works like all liabilities Use standard approach: Increase liability CR Decrease Liability DR Contra–liability “Good thing” for a business (can think of it as having value like an asset) It is a Liability account Works differently Holds an exceptional balance for a liability Special approach: Increase contra-liability DR Decrease contra-liability CR

HST Remittance The HST we have collected gets remitted to the Government The HST we spend buying products/services from other businesses gets refunded to us Two cheques?!! The difference is either refunded or remitted at the end of the year. Larger companies will pay this in installments throughout the year based on predicted amounts

$ Hair Cut $10 $ Hair Products $1,000 $ HST Tax $1.30 $ HST Tax $1.30 HST Paid out to other businesses is refunded by the government… GST/HST recoverable HST Collected from customers Is Owed to the Government… GST/HST Payable $128.7 $130 – 1.30 = $128.7

Transaction #1- Recording a sale Provide a hair cut for $10 cash. Cash 11.30 Sales 10 HST Payable 1.30

Transaction #2 – Recording a purchase Purchased $1000 worth of Hair products (shampoo, conditioner etc.) Hair Supplies 1000 HST Recoverable 130 Cash 1130

Transaction #3 – Remitting HST Collected $1.30, paid $130 Difference is $128.70 – So the government pays us back! Cash 128.70 HST Payable 1.30 HST Recoverable 130

On the Balance Sheet