Best Practice 2010 and beyond
Principles of Quality Assurance “Goal is to build a three-way relationship between bookkeepers, Tax agents and their (o...
Principles of Quality Assurance “Goal is to build a three-way relationship between bookkeepers, Tax agents and their (often mutual) clients”
Competence • •
Continually review the benchmark – What is expected of a Bookkeeper ICB will continue to inform you of new legislation and expectations.
Checking • • • • •
Checking of your work? How? Have check(Task)list to follow for each client When? Check Monthly if possible otherwise Quarterly before lodgment of BAS Who? Bookkeeper performing work or Consultant Reviewing work
Feedback •
Continually build an open communication with Accountant, therefore building ‘notes for accountant’ over the year.
Best Practice Content Have checklist to follow for each client Review your work Monthly or Quarterly – How? Best Practice for common questions Common errors & Reconciliation of BAS Implementing ‘Fair Work’ changes
Checklist for each client • Why have a checklist? – Reduces errors under pressure – Immediate snapshot of work performed – Trail of work performed – Immediate timesheet (task list) of work performed – Immediate ‘hand over’ notes and processes
Checklist Template
Review your work • How? – Through the Balance Sheet – Through the Profit and Loss – Through the Payroll Report – Through the Entitlements Report
Balance sheet • The balance sheet is a snapshot at a single point in time of the company’s accounts. • The purpose of the balance sheet is to give users an idea of the company’s financial position • It is important that all business owners know how to use, analyse and read a balance sheet • • , the Balance Sheet needs to be maintained at all times, so the ‘the story’ of the business can be told.
Find Balance Sheet Problems
Find Balance Sheet problems cont….
Profit and Loss • The Profit and Loss represents the profitability of the company. • The PNL shows: – – – –
Total Sales/Income Gross Profit Margins Total Expenses Net Profitability
,
the Profit and Loss needs to be maintained at all times, so the ‘the story’ of the business can be told.
Find Profit and Loss Problems
Payroll Information
Best Practice for Common Questions • • • • • • •
Assets Threshold and GST Private % Allocation Gift Discount Certificates Prepaid Vouchers Rental Income and Expenses Insurance Proceeds Hire Purchase Payments
Assets Threshold and GST Threshold value of assigning tangible expenditure as assets. •
Under normal Tax System Depreciation the threshold is > $100 inclusive GST to assign as an asset
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Under Simplified Tax System Depreciation the threshold is > $1000 inclusive of GST to assign as an asset.
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Purchase of an Asset from within Australia use CAP Tax Code to separate and link to G10.
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Purchase of an Asset outside of Australia should still be included in the BAS and financials. Create a Tax Code CFR 0% – Capital Acquisitions Free of GST and link to G10
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Private % Allocation Common private expenses include motor vehicle, rent, electricity, rates, water, phones. • Create a General Journal and end of period either monthly or quarterly to draw back the personal use. Reason being the % may change over the year therefore easier to adjust general journals than changing individual transactions. Also its easier for the accountant to see the Private % transaction allocated.
Gift Discount Certificates •
Gift Discount Certificates are only entered into the financials when they are redeemed by a customer.
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Create an Income Account ‘Gift Discount Certificates” and allocate total sale less discount.
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Example: Customer has a 10% Discount Gift Certificate and purchases a $110 Dress
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CR CR
(Sales-GST Ex) (GST Collected)
$100 $10
• • •
DR DR DR
(10% Gift Discount Voucher-GST) (GST Collected) (Banked)
$10 $1 $99
Prepaid Gift Vouchers Selling Prepaid Vouchers Gift Vouchers are purchased by a customer as a gift for future redemption. Dr Bank Cr Liab. Unclaimed Gift Vouchers
$100 $100
N-T N-T
On Redemption of the Voucher the GST will be included in the Sale Cr Sales Dr Bank Dr Liab. Unclaimed Gift Vouchers
$200 $120 $100
GST Incl N-T N-T
Prepaid Vouchers Motorpass Motorpass can be obtained on the day of travel or a running account of which a monetary value is paid. Topping up Motorpass – Create a Motorpass Account Dr RBA Motorpass(Asset) $100 N-T Cr Bank $100 N-T Accounting for Travel on Motorpass from Statement Dr Monthly Travel Total $85 GST Incl Cr RBA Motorpass(Asset) $85 N-T (Remaining Balance of Statement Motorpass = RBA Motorpass(Asset)
Prepaid Vouchers Phonecards Prepaid phonecards are not as clear cut due to ease of access to purchasing a card. BUT the process should be the same. Topping up Phonecard – Create a Phonecard Account Dr RBA Phonecard (Asset) $100 N-T Cr Bank $100 N-T Accounting for Phone Calls from Statement Dr Monthly Phone calls $85 GST Incl Cr RBA Phonecard (Asset) $85 N-T (Note: If a Phone Statement is not obtainable then DO NOT CLAIM GST)
Residential Property Income and Expenses • Residential Rent Received is an Input Tax Sale ITS making any expenses related to the property Input Tax Purchases INP. • Often a Real Estate looking after the property will pay expenses from the rent received. • Create a separate Tax Code ie INR to allocate expenses on receipt of the Rental Income
Residential Property Income and Expenses
s
Insurance Proceeds for Insurance Proceeds for redeeming goods. Eg. Stolen computers. • Insurance Refunds for value of the goods (Ex GST), then purchase of new computers. • Cr • Dr
Insurance Refund (Income) Bank
N-T N-T
• Dr • Cr
New Computers Bank
N-T
CAP
• Make a NOTE for Accountant to write of stolen computers
Insurance Proceeds • The proceeds are not reportable for GST on this basis • • EXCESS PAID TO THE INSURER • If the client paid an excess to the insurer then it is NOT a reportable transaction nor is any GST able to be claimed back • • EXCESS PAID TO THE REPAIRER • If the excess is paid direct to the repairer, and the repairer isn’t acting as agent for the insurance company, then you can claim back the GST on the payment of the excess. If they are acting as agent for the insurance company you cannot claim back any GST credit.
Hire Purchase Payments • Purchase of a CAR on a Hire Purchase Agreement • •
HP – Accruals basis for GST The entire portion of GST on the purchase of the car can be claimed in the period in which the car was purchased,
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ASSUMING THE CLIENT IS ELIGIBLE TO CLAIM IT IN THE FIRST PLACE! Be aware there are rules about private usage and luxury vehicles.
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• HP – Cash basis for GST • Apportion the GST claim over the period of the finance contract, again this assumes they are eligible to claim in the first place. •
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NOTE: The finance payment is composed of a principal and interest component. GST is only claimable on the principal portion of the loan GST.
HP Payment Example
• HP transactions are complicated and would require an accountant to give you the correct transactions. If you are unsure you should code the HP payment to N-T and let the accountant determine the GST at year end.
Purchase CAR on Chattel Mortgages - You are able to claim GST upfront on Total whether you are Cash or Accrual.
Most Common BAS Errors • 51% of SME errors occurred in BAS Preparation through • 12% through incorrect interpretation of GST legislation • 9% when accounting systems changed
Common BAS Errors • Lodging Blank Forms with nothing filled in (requires 1a, 1b and 9 with zero) • Lodging of photocopied version of BAS • GST not included in disposal of an asset • Claiming GST on private portion of expenses • Including Wages and Superannuation in G11 • GST claimed without a valid tax invoice • Claiming GST on the full value of the HP monthly instalment (Note: Full Listing of Errors in Pack)
Reconciliation of BAS for Cash Basis Option 1 Reconciling the GST Collected & GST Paid Step 1: Compare the Balance Sheet Closing Balance for GST Collected. against:MYOB Debtors Summary with Tax – Tax amount with GST Cash Summary Reports – GST Collected Tax amount These amounts should be equal Step 2: Compare the Balance Sheet Closing Balance for GST Paid. against:- MYOB Creditors Summary with Tax – Tax amount with GST Cash Summary Reports – GST Paid Tax amount These amounts should be equal (Note: Quickbooks Report for Summary with Tax Customise Sales by Customer Detail Report (or Purchases by Supplier) Modify > Display > Tick Tax Amount & Tax Code > Untick Balance, Sales Price, UM and Qty > Change Dated Range)
Reconciliation of BAS Option 2 CASH BASIS:- Both MYOB and Quickbooks have the same reporting 1. Run a Tax Code exemption report to ensure all transactions have a tax code 2. Use this report to check that the appropriate tax code has been assigned to the transaction. 3. Run a GST Cash Summary report and total Sales and Purchases of all tax code types. These totals should equal the cash movement of all banks, credit cards, loans and other used in the BAS period. 4.
Run a GST Cash Detail Report for filing purposes with a copy of the original BAS lodged.
Reconciliation of BAS
Reconciliation of BAS Accrual Basis 1. Run a Tax Code exemption report to ensure all transactions have a tax code 2. Use this report to check that the appropriate tax code has been assigned to the transaction. 3. Run a GST Accrual Summary report and total GST Collected and GST Paid should be the same movement in the GST Collected and paid accounts on the balance for the BAS period and should be the same outstanding balance on the Balance Sheet for those accounts. 4. Run a GST Accrual Detail Report for filing purposes with a copy of the original BAS Lodged.
Implementing Fair Work changes • A ‘small business’ being < 15 full time employees receives concession conditions • These include:-Employees can Cash Out of Annual Leave and Personal Leave -Employees can take community Service Leave paid up to 10 days (ie Jury Duty) or other unpaid (ie Fire Fighting) - New Fair Dismissal Code - New Fair Work Information Statement
Cashed out Annual or Personal Leave • Create a Cashed out Annual and/or Personal Leave payroll category to separate from normal Annual Leave payment • Example with MYOB Before
