What is the difference between accrual accounting and accrual GST reporting?
Accrual accounting records expenses when you have a legal obligation to pay, and records income when you have a legal right to claim payment. This is usually when you receive an invoice, or the goods or service. Example: You may sell a TV today and not be paid for it for 60 days. Accrual accounting would record this as income today. You may purchase a TV today and not pay for it for 60 days. Accrual accounting would record this as an expense today. In GST terms this means that you may bill a customer today for $10,000 plus GST of $1,000. You are liable to pay the GST liability regardless of whether the customer pays you today, or in 6 months time. In the same way, you can claim GST Input credits regardless of whether you have paid your supplier today, or pay the supplier in 6 months time.
