Task 7 - BAS Case Study - Accounts Method (Accruals)

Cut N' Grow operates a lawn mowing business (ABN 12 345 678 910). Cut N' Grow's annual GST turnover is less than $10 million and therefore follows Simpler BAS. During the June quarter 2021, Cut N' Grow provided the following reports from an integrated financial software system: General Ledger, P & L, Balance Sheet and Payroll Summary.

You are a registered Bookkeeper and have been appointed to report quarterly BAS for Cut N' Grow.

GST Reporting:

Cut N' Grow's annual GST turnover is less than 10 million. So the business is required to prepare simpler BAS.

Cut N' Grow calculates and reports GST quarterly.

Cut N' Grow reports GST on Accrual Basis and follows the Accounts Method.

PAYG Income Tax Instalment:

Cut N' Grow calculates and reports its PAYG Instalment using the ATO's pre-determined PAYG Instalment of $7097.

General Ledger as at 30 June 2022:

Plant and Equipment

Debit

Credit

Balance

01/06/2022

Opening Balance

19,390.00

19,390.00 Dr

28/06/2022

Blower Vac

1,100.00

20,490.00 Dr

30/06/2022

Closing Balance

20,490.00 Dr

Payroll Activity [Summary] 01/04/2022 to 30/06/2022:

Employee

Wages

Deductions

Taxes

Net Pay

Expenses

Harvey, Angela

$8,304.04

$0.00

$1,414.00

$6,890.04

$788.88

Martin, Rob

$9,207.82

$0.00

$1,704.00

$7,503.82

$874.74

Taylor, Steve

$8,077.77

$0.00

$1,366.00

$6,711.77

$767.20

Perry, Elizabeth

$9,949.32

$0.00

$1,954.00

$7,995.32

$945.18

Total:

$35,538.95

$0.00

$6,438.00

$29,100.95

$3,376.00

Balance Sheet as at 30 June 2022

Assets

Current Assets

Cash at Bank

$35,192.00

Account Receivable

$6,135.00

Total Current Assets

$41,327.00

Non-current assets

Furniture & Fittings

Furniture & Fittings @ Cost

$6,300.00

Accumulated Depreciation F&F

-$368.00

Total Furniture & Fittings

$5,932.00

Motor Vehicles

Motor Vehicles @ Cost

$26,990.00

Accumulated Depreciation MV

-$11,077.00

Total Motor Vehicles

$15,913.00

Plant & Equipment

Plant & Equipment @ Cost

$20,490.00

Accumulated Dep P&M

-$6,418.00

Total Plant & Equipment

$14,072.00

Total Non-Current Assets

$35,917.00

Total Assets

$77,244.00

Liabilities

Current Liabilities

Accounts Payable

$6,713.00

GST Control

$6,392.00

Fuel Tax Credit

-$8,536.00

PAYG Instalment

$7,097.00

PAYG Withholding Amounts

$6,438.00

Superannuation Payable

$3,376.00

Total Current Liabilities

$21,480.00

Total Liabilities

$21,480.00

Net Assets$55,764.00

Equity

Current Earnings

$34,485.30

Capital - Herb Green

$29,670.40

Drawings

-$8,391.70

Total Equity

$55,764.00

Profit and Loss Statement - for the period 1 April to 30 June 2022

Income from Services

Lawn Mowing

$40,200.00

Blower-Vac Services

$13,175.00

Fertilising

$1,500.00

Gutter Clearing

$740.00

Rubbish Removal

$6,200.00

Weed Control

$11,300.00

Whipper-Snipper Services

$23,185.00

Total Income from Services

$96,300.00

Expenses

Advertising

$1,486.00

Bank fees

$450.00

Depreciation

$3,091.00

Fuel (unleaded) @ $1.28/ltr

$20,181.75

Gardening Tools <$300

$3,400.00

Gas & Electricity

$220.00

Insurance

$1,800.27

Motor Vehicle Expenses

$1,938.00

Stationery

$620.00

Superannuation

$3,376.00

Telephone & Internet

$1,643.73

Wages - casual (Gross)

$35,538.95

Total Expenses

$73,745.70

Operating Profit

$22,554.30

Other Income

Fuel Tax Credit

$8,536.00

Interest Income

$3,395.00

Total Other Income

$11,931.00

Net Profit/(Loss)

$34,485.30

Task 7 cont.

Using the information provided (to be completed in the appendix):

a)Complete the Worksheet in the appendix and calculate the GST for 1A and 1B.

b)Complete the Business Activity Statement (BAS) for the quarter ended 30 June 2022 in the appendix. Complete using Option 1: Does this amount at G1 include GST? NO

a)Reconcile the PAYG Instalment Income and GST control account from the Balance Sheet and BAS summary. NB: the business has no previous GST liabilities and PAYG instalment Income payable to ATO. Complete the table in the appendix.

d)A transaction that would not reasonably be expected to recur in the foreseeable future (in frequency of occurrence) is classified as an extraordinary transaction. Review the accounting system of Cut N' Grow (General Ledger, Balance sheet and P & L) and identify the extraordinary transaction involving capital acquisitions. Enter your answer into the appendix.