Separate GST from Expenses in Quickbook

10 January, 2008 (23:33) | Quickbook | By: Cecilia Leung

This is a very common question from Quickbook users. Often time small business owners face the challenge of filing GST, when they realized all those time they entered transactions into Quickbook without setting up the GST account! It doesn’t help when setting up anything in Quickbook seems to be so complicated and required studying the user manual or spend a full day just to browse around the “help” manual.

Don’t Panic! There is an fast and easy solution for that! Here it is.
There are a few options you can do:

Option 1: Fill in your GST return by hand and calculate manually (I will show you how below)
Option 2: Set up Quickbook GST / PST properly so you can use the “File GST” option in Quickbook. ( I will also show you how )
Option 3: Go see a professional and have then file for you, of course additional costs apply!

Option 1: Fill in your GST return manually

This is actually a preferred method if you need to file your GST quick, but haven’t set up your Quickbook properly yet.

Go to Report, and print an income and expense statement (also called profit and loss statement), remember to select the right date range when generate the report.
Take the total income value, and calculate manually the tax your have been collected according to the tax rate of the year. E.g. if your income over the year is $100,000, you collected $6000 ($100,000 x 6%).
Now look at the expense report, for expenses that GST applied, sum up to get the total expenses for those GST applicable expenses. Calculate the GST you have been paid. E.g. If your total expenses are $60,000, you have paid $3600 ($60,000 x 6%)
Your GST payable should be your GST collected minus GST paid. In our example, you will pay Receiver General $2400 ($6000 – $3600)
Now you have all the information you need to fill out the GST form.
Record your GST payment into Quickbook, and assign it as expenses to Sales Tax expense. (If you do not have such expense account, create new)

This method has a draw back. If you pay by installment, and you decided to set up GST in Quickbook, you will need to take extra care on how you set up your GST payable liability account.

Option 2: Use Quickbook Sales Tax function

Go through the Sales Tax set up process. Refer to Report Sales Taxes and Expenses in Quickbook on how to set you sales tax.
Click on Account from List menu (or however you use to browse your chart of account), you should see a GST Payable account set up under Liability.
Print your income and expense report and calculate your GST like Option 1 (see above).
Click on Account from List menu, double click on GST Payable to open the journal entry window. Enter these three records (numbers are as example given in Option 1):
Click Save button. These entry in bookkeeping terms, you increase GST payable, decrease income, and decrease expenses. The reason you do that is because you need to separate the GST from the total expenses, by decrease the GST amount from expenses. The same rule applies to income. Quickbook journal entry is smart enough to ensure you enter the correct “double entries” hence the book is always balance.
Click on Vendor ->File Sales Tax button, go thru the steps and Quickbook should generate you a GST form with all the data filled in.

Of course sometimes it is not as straight forward. For example, auto expenses are often only particularly use as business. The portion used as personal expense cannot claim a GST return. Taking all these extra calculation can be time consuming. Although following the above process with manual calculation can be achieved, if you are not sure, the best bet is to consult a professional.

If you are interested in knowing how to deal with mix personal and business expenses, click here.