S2 Income Reconciliation

The purpose of the income reconciliation is to ensure accounts receivable and payables are tracked and GST has been returned correctly. This is particularly useful where the client is on the payments basis for GST (refer MTG ¶4-920)

The L1 GST Reconciliation workpaper should be completed before working on this workpaper.

Suggested supporting documents

  • GST returns
  • Trial balance

GST return information

Record details of GST returns for the periods that occurred during the current income year.

  1. Period ended date will populate based on the information entered on L1.
  2. Gross income will populate based on the information entered on L1.
  3. Enter details of any zero rated sales in column D (refer MTG ¶32-030).

Income ledger information

This section reconciles the GST return to the general ledger.

  1. Income per above – This is the total of sales recorded in the GST returns for the year.
  2. Where clients are on the payments basis for GST you need to adjust for accounts receivable:
    1. Closing accounts receivable – Enter the closing accounts receivable balance from the general ledger or as per G1 accounts receivable workpaper.
    2. Opening accounts receivable – Enter the opening accounts receivable balance from the general ledger or as per G1 accounts receivable workpaper.
  3. Net asset sales per ledger – Record the GST exclusive sale price of assets sold during the year. Do not include assets that were on revenue account property.
  4. Expense reimbursements – Enter the total GST exclusive amount of disbursements and expenses on charged to customers which have not been included in fee income.
  5. Adjustments per GST reconciliation:
    1. Review all adjustments included on the L1 GST reconciliation workpaper that relate to income such as income not declared and income declared in error.
    2. Enter GST exclusive amounts in column G. For items that increase the GST payable – enter amounts as negative, for items which decrease the GST payable – enter amounts as positive.
  6. Net income per ledger – Enter the GST exclusive general ledger closing balance of the income accounts included in the reconciliation.

Discrepancy identified

Where there is a discrepancy identified compare ledger transactions with GST returns complied to identify the transactions where the discrepancy stems from. Investigate further if required. Where an adjustment is required to the general ledger, prepare a journal entry.

Create journal

Where there is a variance between the workpaper balance and the general ledger balance, create a journal to record transactions that have not already been accounted for.

See Create a journal automatically or Create a journal manually for further assistance.