A business reporting on a cash basis has to report and pay all the money received and paid out in the reporting period. A business reporting on an accrual basis, on the other hand, must report and pay GST on all invoices issued in that period regardless of receipt and claim GST on all purchases, whether paid or not. An accrual based BAS will include all invoices and bills plus any cash transactions in the reporting period.
Reporting GST on your Business Activity Statement can take one of two methods, cash or accrual.
The method you choose depends on your business, may even depend on your industry. A business selling on account in an industry where payment terms are 30 or more days may want to consider the impact on accrual reporting on their cash flow. A business that has no receivables, on the other hand, may consider the effects of reporting on an accrual basis.
Choice of method can affect the business’s cash flow.
Businesses are allowed to switch reporting methods from cash to accrual or vice versa. If you are unsure what method is best for you, contact your tax professional or the First Class Accounts consultant of your choice.
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