Home – New Forums Money matters Invoiced last financial year, payment this financial year

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  • #978855
    vxd
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    Hi,

    We’ve invoiced a few clients last financial year but those invoices haven’t been paid.

    If they pay next week, are the payments counted towards last financial year or this new financial year?

    #1109999
    MyGreatIdea
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    The date of the invoice places the income in last financial year – when they pay is irrelevant to your profit and loss reports, as the outstanding amount will show as an asset in your balance sheet (Trade Creditors) as at 30 June 2012.

    If you’re talking about GST though, that will depend on whether you’re a cash or accrual reporter.

    Wendy :)

    #1110000
    James Millar
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    Some variations to the general rule of accruals for income tax calculation

    1. Businesses that were in existence before 2005 that opted to use (back then) the cash based income tax option under the business STS regime. There is legacy access to this.

    2. Invoices raised where the services are yet to be provided (essentially prepaid income). There can be a case that income is not “derived” for the purposes of conventional income tax assessment. In that case it can be transferred to the balance sheet (as a liability) from the income statement for the period.

    Just clarifying your post CoupleIT, I think you were referring to the asset being a trader debtor (account receivable) and not a trade creditor (account payable). And yes as you mention, the GST treatment may be quite different to this depending on cash or accruals.

    Helping build better businesses and better lives with expert financial and taxation advice. [email protected] www.360partners.com.au 03 9005 4900
    #1110001
    MyGreatIdea
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    JamesMillar, post: 122541 wrote:
    Just clarifying your post CoupleIT, I think you were referring to the asset being a trader debtor (account receivable) and not a trade creditor (account payable).

    Yes 😮 it’s been a long week…

    Wendy :)

    #1110002
    yourvirtualboard
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    I read the post and didn’t even register (just took it as reading debtors because the context was correct) and that’s why, despite knowing what you mean or intended to write a little mistake can creep in and why for things that matter it’s always good to have an experienced set of eyes run over it.

    #1110003
    AGMBris
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    Hi

    Yes it is a question of whether you report on a cash or accrual basis. It is unlikely you would run your financial statements on a cash basis thus the invoice created date is the relevant date. That invoice would then been seen as part of your trade debtors balance at 30 June 2012 and be a part of your 2012 P&L.

    GST – most businesses will run GST on a cash basis. So, the GST is not payable on that sale until the cash is received, thus you would be liable for the GST component in the next financial year or the July-September12 quarter if you report quarterly.

    Ah the joys of accounting, Good Luck!

    #1110004
    happygirl
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    AGMBris, post: 122600 wrote:
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    GST – most businesses will run GST on a cash basis. So, the GST is not payable on that sale until the cash is received, thus you would be liable for the GST component in the next financial year or the July-September12 quarter if you report quarterly.

    Yip the joys of accounting – I was of the understanding that there where certain criteria that determined your eligibility for running GST on a Cash Basis??

    I know most business run their revenue on an Accrual Basis, but did not know you could do the GST on a Cash basis irrelevant of Turnover.

    Is my understanding correct- many thanks

    #1110005
    MyGreatIdea
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    When you register you are given the option of either Cash or Accrual reporting…it’s up to each business to decide what’s best for them.

    From my experience, small service businesses tend to be Cash as this helps their cash flow. Larger businesses tend to run Accrual as they run larger Trade Debtors balance. It allows the GST to balance off in the quarter the invoicing was done.

    Wendy :)

    #1110006
    happygirl
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    Thanks Couple It,

    Good thing that I am not an accountant, I understand the principals of Cash vs Accrual accounting and that a business can elect which route to go, with most large businesses using the Accural Method. (i.e Revenue is recorded on the P&L at the time an invoice is sent irrespective of when it is paid).

    However, I did not understand that you could elect the GST method of reporting. I thought there were certain criteria that determined how you report per the ATO.

    http://www.ato.gov.au/content/13266.htm

    I must be misunderstanding something, but not sure what :-(

    Thanks for the help.

    #1110007
    MyGreatIdea
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    Interesting. I assume though that since every new registration for GST has reached the $75,000 turnover (or is still under it), they are still under the $2mill turnover requirement to be able to register as Cash. Therefore every business, in effect, has the choice.

    What do you think?

    Wendy :)

    #1110008
    StellarScott
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    Couple It, post: 122747 wrote:
    Interesting. I assume though that since every new registration for GST has reached the $75,000 turnover (or is still under it), they are still under the $2mill turnover requirement to be able to register as Cash. Therefore every business, in effect, has the choice.

    What do you think?

    Wendy :)

    There is also a difference between what you report to the ATO and what shows in your profit and loss. Profit and loss in best practice shoud include all income and expenses whether invoiced or not

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