What account should I allocate money that is paid for GST & PAYE

Bonsaiguy
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What account should I allocate money that is paid for GST & PAYE

Hi, first post here. 

 

I have started collecting and paying GST and need help allocating GST transactions. When I pay GST and PAYE to IRD, what account should it go under? I.e: Payroll expenses, liability, etc. Not sure on this one. 

 

Many Thanks

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Bluewave
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Re: What account should I allocate money that is paid for GST & PAYE

Although you should check everything with your own accountant or tax agent, here is some basic accounting:

In your Balance Sheet, the amounts you collect or pay in GST are listed under "Liabilities".  GST Collected is a liability payable, and it is shown with a CR balance. GST Paid is taken off that payable amount before remitting GST to your tax office, so it is a negative liability (balance is shown with a minus sign or parentheses).  Any income tax that is withheld from an employee's pay, eg PAYE, is posted to a Liability account with a name such as "PAYE Withheld", and it will also have a CR balance.  When paying your liabilities, you are taking money out of your bank account (an Asset account with a DR balance) to pay the tax office.  The payment transaction will simply CR the asset account and DR the liability account.  There are a few more steps with the GST, but this is the big picture. 

The main point of all the above is that these amounts in and out are NOT to be treated as Income or Expenses.

Hope this helps!

Bonsaiguy
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Re: What account should I allocate money that is paid for GST & PAYE

Thank you, Bluewave! 

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