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rgayle
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

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impossible
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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11 Comments 11
rgayle
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?
impossible
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.

rgayle
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?
rgayle
Level 1

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

Thank you for your assistance.
impossible
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.
Paul007
Level 2

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. 

walksoftly
Level 1

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

If it isn't recorded as an expense how do I make this adjustment to the refund that I was owed

Paul007
Level 2

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

Penalties and Interest are to be recorded totally separately from your HST Payable account and should not affect it in anyway. Do not deduct any penalties or interest from the refund owed to you. When you get the refund cheque, which will have subtracted from it any penalties and interest you owed, enter the full refund amount to deposit in your "Bank" account, or whatever you named it, as shown in your QuickBooks Customers > Receive Payments window with "Receiver General - Receivables" as the customer selected. Then enter a payment from your QuickBooks "Bank" account for the difference of the amount owed to you and the amount received, to the expense account you should have first set up, called for example, "HST Penalties & Interest", with the payee "Receiver General". That way the net amount entered in your QuickBooks "Bank" account will match the amount you actually deposited in your real bank account. I hope that helps.

walksoftly
Level 1

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

Is the payment to the expense account done in the cheque register?

Paul007
Level 2

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

Yes

walksoftly
Level 1

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

I got it entered, thanks so much for your help!

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