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Level 1

What is the correct journal entry when entering interest/penalty on GST/HST returns?

What is  the correct journal entry when entering interest/penalty on GST/HST returns?


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Best answer March 11, 2019

Best Answers
Level 6

What is the correct journal entry when entering interest/penalty on GST/HST returns?

It is not a Journal Entry - Penalties and Interest payable to the CRA should be recorded as a bill from Receiver General and posted to a Penalties/Interest Expense type account. The transaction is unrelated to GST remittances and must not affect the GST Payable or GST Expense Accounts.

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6 Comments
Level 1

What is the correct journal entry when entering interest/penalty on GST/HST returns?

Thank you. So then should I write a cheque paid to CRA and charge an Interest/Penalty expense account?
Level 6

What is the correct journal entry when entering interest/penalty on GST/HST returns?

It is not a Journal Entry - Penalties and Interest payable to the CRA should be recorded as a bill from Receiver General and posted to a Penalties/Interest Expense type account. The transaction is unrelated to GST remittances and must not affect the GST Payable or GST Expense Accounts.

View solution in original post

Level 1

What is the correct journal entry when entering interest/penalty on GST/HST returns?

So should I then write a cheque payable to C.R.A and charge the interest/penalty expense account?
Level 1

What is the correct journal entry when entering interest/penalty on GST/HST returns?

Thank you for your assistance.
Level 6

What is the correct journal entry when entering interest/penalty on GST/HST returns?

Yes - use the Expense tab on the cheque rather than the Item tab.
Level 1

What is the correct journal entry when entering interest/penalty on GST/HST returns?

Interest on late GST-HST are not considered fines or penalties, which are non-deductible for income tax. However, the Income Tax Act disallows deducting penalty interest for GST-HST. For Corporations the non-deductible amount is added back to income on Schedule 1 of the T2 tax return.