How Cash and Accrual accounting affect GST

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

1. Go to All apps , select GST, then select Overview (Take me there).
2. The GST Centre reflects the accounting basis that was set as the default.
   You can change the accounting method to see how much GST you owe using Cash versus Accrual using the GST Liability Report.

To change the accounting method, follow these steps:

1. Go to Reports and select Standard reports (Take me there).
2. Select GST Liability Report from the list.
3. Change the Accounting method.

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.