Master in Accounts & high court Advocate
9111 Points
Joined December 2011
A common scenario involving a purchase return and credit note with GST. Accounting Treatment: 1. *Initial Purchase*: When you purchased the computers, you would have recorded the transaction as a purchase, including the GST input credit. 2. *Purchase Return*: When you returned the computers, you should reverse the initial purchase entry, including the GST input credit. Journal Entries: 1. *Initial Purchase*: Debit: Computer Account (Asset) = Purchase Value + GST Credit: Vendor's Account (Liability) = Purchase Value + GST Credit: GST Input Credit Account = GST Amount 2. *Purchase Return*: Debit: Vendor's Account (Liability) = Purchase Value + GST Credit: Computer Account (Asset) = Purchase Value + GST Debit: GST Input Credit Account = GST Amount Credit Note Accounting: 1. *Credit Note Receipt*: When you receive the credit note from the supplier, you should record it as a reduction in the vendor's liability. 2. *Journal Entry*: Debit: Vendor's Account (Liability) = Credit Note Value + GST Credit: GST Input Credit Account = GST Amount (if applicable) GST Input Credit: 1. *Reversal of GST Input Credit*: Since you returned the computers, you should reverse the GST input credit claimed initially. 2. *GST Input Credit Account*: Debit the GST Input Credit Account to reverse the input credit claimed. Ensure you maintain accurate records and follow the correct accounting treatment to reflect the purchase return and credit note in your books of account. Consult a tax professional or accountant if needed.