Question

Prepare journal entries for GST for bad debts expense. LO8 Brian Bazaar had sold goods on credit in September 2019 for $5500 (including 10% GST). In November 2019 he became aware that the debtor M. Waters was bankrupt and the creditors were unlikely to receive any amounts due. On 28 November, the accountant for Brian Bazaar wrote the debt off against the allowance for bad debts account. Brian Bazaar uses the non-cash (accruals) basis for reporting and remitting the GST obligations.

Required

(a) Prepare the journal entry to record the bad debt write-off.

(b) Prepare a brief memo to the general manager explaining the effect of the bad debt write-off

on the GST liabilities and the difference between reporting the GST on the cash and non-cash

(accruals) basis in regard to bad debts.

Answer 1

solution:

the given LO8 brian bazaar had sold goods on credit in september 2019

the accountant for brain for bazaar write the debt off aginst the allowance for bad debts account brain bazar the non cash bais for reporting and reqired

a)the given the journel entry to record the bad debt write off

debit alloance for bad debts$5000

debit gst adjustment $500

credit account receivable $5500

b)the given liabilites and the difference b/n reporting the gst on the cash non-cash

memo to the GM

suppose if the reported on cash then a bad debit wont affect the GST

this is because the GST is only reported once invoiced and received from the customer

if the reporthing is on accrual based on the writing off a bad bebt will only affect your GST it has alread been reported and paid the adjustment in the customer GST return for the GST