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Published byLesley Knight Modified over 9 years ago
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Paying HST
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Harmonized Sales Tax Last class, we discussed Ontario’s switch to Harmonized Sales Tax of 13% – PST – 8% – GST – 5% We talked about collecting HST on behalf of the government any time we made a sale – HST Payable We did not talk about how to account for the payment of the HST money to the government
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Sales Taxes HST Payable is a Liability Accounts. This is because the business owner collects the money from the sale, but has to give it to the Government. Therefore, HST Recoverable is a Contra- Liability!
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HST Recoverable For our class, we will assume that all HST paid by the business for expenses is recoverable – Why not assets? This is not the fact in “real life”, where different types of expenses qualify for different levels of refunds Only GST will be recoverable – most businesses will not pay PST on expense items – If you pay PST – it will not be recoverable Recoverable taxes will be placed in an account called HST Recoverable
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Sales Taxes Contra Accounts revisited Recall that Contra Accounts are accounts that are “married” to each other but act Contrary to each other. To record transactions with Sales Taxes, you will require your 2 nd Contra Account (Drawings was your first)
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HST Recoverable Purchase invoice received from Oakley Motors for body repairs done on business automobile, $750.00 plus GST of $52.50 Automobile expense$750 HST Recoverable$52.50 Cash $802.50
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Remitting Taxes HST must be remitted (sent) to the government at a later point (normally monthly) The business will have both HST Payable and HST Recoverable. The HST Recoverable is subtracted from the HST Payable and the balance (leftover amount) is paid to the government.
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Remitting HST Below is the journal entry for a business with $147.47 in HST Recoverable and $952.69 in HST Payable: HST Payable952.69 Bank805.22 HST Recoverable147.47 This will wipe out the HST Payable account and HST recoverable account to a value of 0 at the end of the month
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Sales taxes and the balance sheet Custodial Services Balance Sheet March 31, 2011 Liabilities Accounts Payable5634.90 HST Payable2309.65 Less: HST Recoverable (1567.90)741.75 Bank Loan2500.00 Total Liabilities9430.94
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Today’s Work Pg 332 #20-22 + Worksheet Merge all transactions for PST and GST into HST HST is 13% (do not recalculate any given GST/PST values) *Change accounts to reflect HST payable and HST Recoverable*
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