Hi Laavanya ,
Welcome to the Community Forum!
In this scenario, we recommend consulting an accountant for accurate guidance. However, you can generally debit the expense account (e.g., "Consulting Fees") and credit Accounts Payable or Bank for the service amount. Then, debit the GST Paid account and credit the GST Collected account for the GST. Finally, if paying the supplier, debit Accounts Payable and credit Bank. This ensures the expense and GST liability are properly recorded in your accounts.
Regards,
Earl
Hi Earl,
Can I please ask how the GST Collected comes into the equation? I have drawn up T accounts to allocate values for the above example and I cannot understand where the GST Collected amount comes from? I understand DR Consult Fees as an expense with the GST relating to that going to GST Paid. The Cr is Accounts Payable. Then payment of this account is CR Bank and DR Accounts Payable. How do you arrive at a GST Collected amount please?
Many thanks
Leah
