01 August 2020
Dear all I have a doubt regarding, while preparing p&l account sales & purchases Consider / Includes gst or not? As per my knowledge sales (Turnover) & purchases includes taxes.
In my organisation p&l accounts, they are showing purchases & sales before taxes,why? Kindly help me.
01 August 2020
Dear Bhaskar An entity collects GST on Sale of Products on behalf of the government. The collection of GST is not an inflow for a company on its own account. Here an entity acts as an intermediary. The GST collected has to deposit with the government within a particular time frame. Therefore the revenue generated has to be shown net of GST in Financial Statements.
01 August 2020
And as I said GST collected has to be deposited with the government within a given time frame. But at the time deposit, we will get the credit of GST paid on purchases. For that reason GST paid on purchases is shown separately in the receivable account and GST collected in the payable account. And at the end of the month if there payable is more than receivable, then the Difference amount is to be deposited with the government.
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