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How Cash and Accrual accounting affect GST

by Intuit Updated 6 months ago

Learn how cash and accrual accounting methods affect GST.

The accounting method you use — cash basis vs accrual basis — can affect the amount of GST you owe.

In this article, we'll explain how.

Understanding cash vs accrual

When you use the cash basis method, you report your income when you receive it.

When you use the accrual basis method, you report your income when you bill it.

For example:

In August, you send out a $1000 invoice with a GST rate of 10%, for a grand total of $1100. You receive a $440 payment in August, and the remaining $660 in September.

  • With cash basis, you owe two GST payments, $40 for August and $60 for September, because you received payments in both August and September.
  • With accrual basis, you owe one GST payment of $100 in August, because you invoiced your customer in August.

View the difference

The GST Centre reflects the accounting basis that was set as the default, but you can change the accounting basis to see the difference in GST owed using cash vs accrual methods on the GST Liability report.

  1. Go to Reports (Take me there), then select GST Liability report from the list.
  2. Select Customise.
  3. Change the Accounting Method.
  4. Select Run Report.​

Depending on your location, there may be additional rules that govern when to use a cash or accrual basis. Talk to your accountant about which method is most appropriate for your company.

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