GST on advance payment

Software: QuickBooks accounting software

Assume your GST cycle is quarterly, ends in March, June, September, and December. You have issued an advance payment of $10,000 before the 7% GST to a supplier in the month of October 2015 via a Write Cheque transaction.

If the advance payment received forms part payment of the supply, GST is chargeable.


The double entry of the above advance payment is:

Debit the Advance Payment (Other Current Asset) 10,000
Debit the GST input 700

Credit the Bank 10,700

In the month of January 2016, the supplier sends you the Bill of $50,000 before the 7% GST. You recorded the supplier bill in QuickBooks via an Enter Bill form. Under the expenses tab, select the relevant expense account and enter 50,000 with the 7% GST (QuickBooks will calculate the GST amount automatically). Then, use the Advance Payment account on the following row, enter a negative value of 10,000 with 7% GST code. The total outstanding of this bill will be 40,000 before the 7% GST.

Screen Shot 2016-01-21 at 10.26.22 PM

The double entry of the bill is:

Debit the Expense 50,000
Debit the GST input 3,500

Credit the Advance Payment 10,000
Credit the GST input 700
Credit Accounts Payable 42,800

The above two transactions are in a different GST cycle. The Advance Payment is in the December 2015 GST cycle, whereas the Bill is under the March 2016 GST cycle.