Finance Assignment: Administer Subsidiary Accounts and Ledgers

This assignment solution covers the administration of subsidiary accounts and ledgers for Computer Equipment and Software Pty Ltd. It includes detailed analysis of GST implications on various expenses like bad debts, bank fees, cleaning, council rates, interest on loans, insurance, legal costs, marketing, merchant fees, office equipment, motor vehicles, rent, repairs, superannuation, travel, and utilities. The solution provides calculations for GST for the March quarter, private use adjustments, and a completed worksheet showing expenses, income, and profit/loss. Furthermore, it addresses the treatment of GST and PAYG tax in the balance sheet, including provisions for GST and PAYG tax, and includes references to relevant books and journals. The assignment also examines a discrepancy in payment from a client, Café Culcha, and suggests actions to rectify the situation.

Administer subsidiary accounts
and ledgers
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Table of Contents
Table of Contents.............................................................................................................................2
TASK 1............................................................................................................................................1
Part A...........................................................................................................................................1
Part B...........................................................................................................................................4
Part C...........................................................................................................................................7
REFERENCES................................................................................................................................8
TASK 2............................................................................................................................................9
1. Thoughts regarding Café Culcha’s payment...........................................................................9
2. Actions to be taken to rectify discrepancies............................................................................9
3. Comparison of receipts against the subsidiary ledgers and explanation of the events that
happened......................................................................................................................................9
4. Explanation of the actions that will be taken to rectify discrepancy.....................................10
REFERENCES..............................................................................................................................11
TASK 3..........................................................................................................................................12
1. General Journals....................................................................................................................12
2. General Ledger......................................................................................................................12
3. Receivables subsidiary ledgers..............................................................................................13
4. Reconciliation of receivables subsidiary accounts................................................................14
REFERENCES..............................................................................................................................15
Part A.........................................................................................................................................16
Part B.........................................................................................................................................17
REFERENCES..............................................................................................................................20
TASK 5..........................................................................................................................................21
1. Recording transactions in the General Journal......................................................................21
2. Recording transactions in the General Ledger.......................................................................21
3. Recording transactions in the Payables Subsidiary Ledger...................................................23
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4. Reconcile Subsidiary Ledgers with Accounts Payable Control in the Reconciliation
worksheet...................................................................................................................................23
REFERENCES..............................................................................................................................25
TASK 1
Part A
Particulars Treatment Explanation
Bad debt
written off
Input taxed
supplies
When the organisation will be writing the bad debt
then it can claim back the GST if the amount of it is
not already occurred. When the payment is recouped
after allowing the debt as a deduction from net
income then this amount will be required to be
added as the accessible income of the year in which
it was received and then the company will be
required to repay the GST to Australian Taxation
Office.
Bank fees Non GST According to the Australian Taxation laws no GST
is applied on Bank Fees and other interested as these
are considered as financial supplies. If the banking
fees is general then only it will be free from GST if
it is merchant banking fees then GST will be applied
on it. In the case of Computer Equipment and
Software Pty Ltd it is estimated that the bank fees is
general therefore GST will not be applied on it
(Cassidy and Cheng, 2017).
Cleaning Input taxed
supplies
The rate of GST which is applied on the cleaning
services by Australian Government is 18% therefore
Computer Equipment and Software Pty Ltd will be
required to pay GST upon all the services at 18%.
Council rates Non GST In Australia GST is not applied on council rates
therefore no GST will be required to be paid by the
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organisation on it.
Interest on loan Non GST No GST is required to be paid on a loan as it is a
financial supply under the item 2 of the table of GST
regulations of Australia. The subsection for it is 40-
5.09(3).
Insurance Capital purchase
(Input Taxed)
If an enterprise is eligible for GST credit on the
insurance policy then it can claim it with the help of
activity statement. Computer Equipment and
Software Pty Ltd can only claim the part of
insurance which is related to business. According to
Australian Law GST is charged on all the insurances
other than life insurance (Datt and Keating, 2018).
Insurance
stamp duty
GST free
purchases
Under Australian Law no GST is applied on the
stamp duty as these are the component of premiums.
Legal costs Input taxed
supplies
From 1St July 2000 all the costs and disbursements
are liable for GST in Australia. Therefore, Computer
Equipment and Software Pty Ltd will be required to
apply GST on this element.
Marketing Input taxed
supplies
GST will be applied @10% at marketing expenses.
It is the general rate of GST which is applied to all
the expenses.
Merchant fees Capital purchase
(Taxable)
All the charges and merchant fees are subject to
GST and all the companies are required to apply it
on accurate rate on yearly, half yearly or quarterly
basis.
Office
equipment
expenses
Capital purchase
(Taxable)
If an organisation is selling or buying this type of
capital asset then it is essential for that company to
be registered for GST (James, 2018). GST will be
applicable on this element of profit and loss account
of Computer Equipment and Software Pty Ltd.
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Motor vehicle Capital purchase
(Taxable)
Motor vehicle is considered as the capital asset and
according to rules and regulations of ATO it is
essential for all the companies to pay GST of such
purchases or sales.
Rent Input taxed
supplies
If the rent is residential then it is not taxable under
GST laws, but if the rent is paid for office premises
then the entity is liable to apply GST rules on it. It
has been estimated that the rent which is shown in
the profit and loss account of Computer Equipment
and Software Pty Ltd is paid for office building
therefore the entity is required to apply rules for the
same.
Rent bond Capital purchase
(GST Free)
Any type of bond is not taxable under GST rules and
regulations of Australia. Rent bond for commercial
property is to be allocated as the asset which will be
reimbursed in future by the owners on departure of
the asset. It is the main reason why Computer
Equipment and Software Pty Ltd will not be liable to
apply GST laws on this element.
Repairs and
maintenance
Input taxed
supplies
It is a service which is opted by an organisation to
carry out operations in future therefore the GST will
be applicable on it @18%.
Superannuation Input taxed
supplies
Superannuation is the responsibility of an employee
to contribute a specific amount in it and the
employer also contributes in it. Since February 2000
superannuation is subjected to be treated under GST
laws. The rate of GST for it is 10% (Krever and
Teoh, 2017).
Travel – local Input taxed
supplies
Domestic travel is required to be treated under GST
laws of Australia. The main element which is
focused under it is that the traveller must be
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residential in case of outsider GST will not eb
applicable. In case of Computer Equipment and
Software Pty Ltd GST will be applied on this figure
because all the owners of the company are residents
of Australia therefore, they will be required to apply
GST.
Utilities (Gas
and electricity)
GST free
purchases
In Australia Gas and electricity are not subject to
GST therefore the entity will not be required to pay
any GST on this element.
Utilities
(Water)
GST free
purchases
Water is considered as one of the key utilities of
individuals therefore it is also not chargeable under
GST laws and the company will not have to apply it
on this element of profit and loss account.
Wages paid to
employees
Non GST The employer will withhold the required amount of
tax based upon the data provided by the TFN
declaration of employees. There is no GST is
applied upon the wages of employees.
Wages amount
withheld
Non GST GST will not be applicable on this figure of profit
and loss account because of the Australian taxation
rules for GST.
Part B
a. Calculation of GST for the March Month:
Expenses March Quarter
GST
Bad debts written off 345
Bank fees Nil
Cleaning 468
Council Rates Nil
Interest on Loan Nil
Insurance 665
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Insurance stamp duty Nil
Legal costs 1500
Marketing 9000
Merchant fees 969
Office equipment expenses under $1,000
per item 329
Motor vehicle (50% private use) 38
Rent 4400
Rent Bond Nil
Repairs and maintenance 90
Superannuation 343
Travel - local 125
Utilities (Gas & Electricity) Nil
Utilities (Water) Nil
Wages - paid to employees Nil
Wages - amount withheld Nil
Total GST Paid 18272
From the above table it has been analysed that total amount of GST which will be paid by
the organisation is 18272 dollars.
B and C.: Private use items and adjustments:
Motor vehicles that are used by the organisation are partially used for personal use. While
calculating GST amount of it only 50% GST is applied on it because of 50% use of it for
personal work (White, 2017). The amount of it is calculated by making following adjustments:
Total value of motor vehicles: 750
Percentage of GST: 10%
Total GST = 750 *10%
= 75
Personal use of motor = 50%
GST of personal used Motor 75 – 50%
= 37.5
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GST for motor vehicle: 75 – 37.5 = 37.5 or 38.
D and E.: Completed work sheet:
Computer Equipment and Software Pty Ltd Profit and Loss (GST inclusive) - Accruals Basis
Expenses GST
Type Jan-18 Feb-18 Mar-18
March
Quarter
Totals
March
Quarter
GST
Bad debts written off $0 $3,450 $0 $3,450 345
Bank fees $150 $135 $360 $645 Nil
Cleaning $867 $867 $867 $2,600 468
Council Rates $4,351 $4,351 Nil
Interest on Loan $15,000 $15,000 $15,000 $45,000 Nil
Insurance $6,646 $0 $0 $6,646 665
Insurance stamp duty $332 $0 $0 $332 Nil
Legal costs $7,500 $7,500 $0 $15,000 1500
Marketing $40,000 $40,000 $10,000 $90,000 9000
Merchant fees $2,135 $3,565 $3,988 $9,688 969
Office equipment expenses
under $1,000 per item $1,097 $1,097 $1,097 $3,292 329
Motor vehicle (50% private
use) $250 $250 $250 $750 38
Rent $14,667 $14,667 $14,667 $44,000 4400
Rent Bond $29,333 $0 $0 $29,333 Nil
Repairs and maintenance $167 $167 $167 $500 90
Superannuation $1,145 $1,145 $1,145 $3,434 343
Travel - local $417 $417 $417 $1,250 125
Utilities (Gas & Electricity) $617 $617 $617 $1,850 Nil
Utilities (Water) $1,100 $1,100 Nil
Wages - paid to employees $12,717 $12,717 $12,717 $38,150 Nil
Wages - amount withheld $2,400 $2,520 $2,385 $7,305 Nil
Total GST Paid 18272
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Expenses Total $135,438 $109,563 $63,675 $308,676
Income
Sale of computer hardware $324,010 $443,880 $332,340 $1,100,230 198041
Sale of computer software $15,642 $15,442 $16,548 $47,632 4763
Export Sales $25,123 $35,600 $48,000 $108,723 10872
Cancelled sale of computer
hardware room the previous
period -$2,750 -495
Total GST Collected 213181
Income Total $362,025 $494,922 $396,888 $1,256,585
Profit / Loss $226,587 $385,359 $333,213 $947,909
Other Payments
Fit out and setup of new
shop $131,706 $39,487 $286 $171,480 17148
December BAS Remittance
to the ATO $0 $113,128 $0
Directors Loan Repayment $0 $0 $0
Total GST Balance 177761
Part C
Treatment of provision of GST and PAYG tax in balance sheet:
Liabilities Amount Assets Amount
Provision for GST (according to
closing balance of profit and loss
account)
177761 Current assets XXX
Provision for PAYG tax
Instalment tax: 50000
57700 Fixed assets XXX
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Less: Withheld 2300
235461 XXX
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REFERENCES
Books and Journals:
Cassidy, J. and Cheng, A., 2017, January. Legislative Responses to GST Tax Avoidance in
Australia and New Zealand: Lessons for China?. In 2017 International Conference of
Chinese Tax and Policy: The Function of Tax in the New Wave of Economic
Development in China.
Datt, K. H. and Keating, M., 2018, April. The Commissioner’s obligation to make compensating
adjustments for income tax and GST in Australia and New Zealand. In Australian Tax
Forum (Vol. 33, No. 3).
James, K., 2018. Applying the GST to imports of low-value goods in Australia. Applying the
GST to imports of low value goods in Australia,(2018), 47.
Krever, R. and Teoh, J., 2017. GST and Insurance: Australia. In VAT and Financial Services (pp.
319-335). Springer, Singapore.
White, H., 2017. Quarterly Essay 68 Without America: Australia in the New Asia (Vol. 68).
Quarterly Essay.
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TASK 2
1. Thoughts regarding Café Culcha’s payment
From the books of A1 Bakers it has been analysed that at the end of March month total due
amount by Café Culcha is 1085.70 dollars. The book is also showing that the payment which was
made by the café at 2nd April is 996.60 which is very low as compared to the balanced amount.
The total owed amount by this client is 135.30. There are various reasons due to them the café
may have failed to make the appropriate payment (Goel, 2018). All of them are as follows:
 The first reason due to which Café Culcha may not have made whole payment is lack of
funds. It is possible that the entity is not having sufficient finance to make the payment
because it is starting of month as well as the financial year. At the beginning of the month
all the due payments are made therefore it is possible that after making all the payments
the cafe was not having sufficient funds to make full settlement of A1 Bakers.
 By analysing the records, it has been evaluated that Café Culcha always make payments
on time and there is no information regarding its arrear in the payments. Another reason
which may have resulted in wrong payment by the café is improper records of due
payments. It is possible that the accounting department was not able to keep the records
of accurate payments that will be required to be made in future. It is the other cause of
making wrong payment (Kuznetsov, 2018).
2. Actions to be taken to rectify discrepancies
According to the credit policy of A1 Bakers if a client makes the monthly payment but the
amount paid is not correct then the customers should be telephones by it and the situation
clarified with the client. As Café Culcha have not made the right payment therefore the managers
of A1 Bakers will call the owner of café and clarify the situation. By taking this step the
discrepancies could be dealt properly and the due payment could be recovered by A1 Bakers.
3. Comparison of receipts against the subsidiary ledgers and explanation of the events that
happened
All the steps to deal with the discrepancy are taken by the management of A1 Bakers and a
subsidiary ledger is received from Café Culcha (Putra, Budiartha and Sujana, 2018). The ledger
which is received from the café is as follows:
Date Invoice Details Debit Credit Balance
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