Hi there, I’m Nick Roberts, I am an accountant who has been working in public practice for the last 12 years.
I was an early adopter of Xero in 2007, and have been working with this platform (as well as other accounting systems since). I would like to use my expertise to help people with their use of Xero and other accounting software solutions.
For this blog post I would like to cover how to ensure that your GST in your GST returns matches the GST balance on your balance sheet.
So you got your end of year accounts back from your accountant and there is a note included with them saying that you have additional GST to pay. You wonder how did this occur and how your accountant worked this out.
Well this blog post is for you I am going to cover how to reconcile the GST per the GST return to GST on the balance sheet.
Reconciling GST Return to GST on Balance Sheet
The first step is to run your balance sheet.
Accounting tab then Balance sheet;
The First thing to do is change the date to the end of the GST period in this example 31 July 2019.
The next step is to look at the amount on the balance sheet and see if it matches to the GST return.
The Second step is run the GST reconciliation report.
The majority of businesses are on the payments basis for GST and so only pay GST when they receive payment for invoices or claim GST when they pay a bill, however the Balance sheet includes all GST including that for Accounts Receivable (Money that is owed to you) and Accounts Payable (Money that you owe).
Instead of using the GST return to match the GST balance to your balance sheet, I suggest using the following report as it takes into account any outstanding GST returns and includes GST on Accounts Payable and Accounts Receivable.
GST Reconciliation;
- In the Accounting menu, select Reports.
- Under Tax, select GST Reconciliation.
You want to set the GST date range from the start of the Financial year that you are in to the end of the current GST period.
The GST reconciliation report can look quite daunting however I will go through the steps in detail on how to complete it.
- The first step is to enter the Date range, which is usually from the start of your financial year to the end of the period that you are reconciling to, in this example 1st of April 2019 to 31 July 2019.
- The second step is to enter the GST Filed for both GST Collected (GST to pay on sales) and GST Paid (GST to claim on purchases);
- The easiest way to obtain this information is to go to GST return report and look at the final returns tab.
GST Account Summary
Payments basis
If your organisation uses the payments basis for GST, the GST account summary breaks down GST outstanding on the payments basis at the end of the reconciliation period.
The example in this section is different from the example used elsewhere on this page.
- GST Owing – The net value of GST filed amounts not yet paid to or refunded from Inland Revenue
- GST in Accounts Receivable – The GST component of approved invoices awaiting payment at the date of this report
- GST in Accounts Payable – The GST component of approved bills awaiting payment at the date of this report
- GST in expense claims – The GST component of approved expense claims awaiting payment at the date of this report
- Unfiled GST – The net value of Unfiled GST totals in the GST Collected and GST Paid section of the reconciliation
The GST Account Summary balance should match your GST Account Balance at this date.
I have completed the report for this example;
In this Example;
GST Per GST Return Including AP and AR $355.98
GST Per Balance Sheet $355.98
Difference $Nil
In this example everything has matched up, however this is not always the case in my next blog post I will cover the steps to work out where the issues are when this doesn’t match.
Thank you for your time in reading this, if you have any questions or suggestions for future posts please contact me at nick@zero-tohero.com or on 0224059312.
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