Question

ACC213: Introduction to Income Tax in Singapore

Illustrate the journal entries for the two following transactions of ZXC:

 Received a Debit Note from a GST-registered business for goods rejected amounting to $8,000.

 Issued a Credit Note to replace the above-mentioned Debit Note for the same amount.

(5 marks)

Answer 1

PART – 1)

Debit note are reported separately in GST return. Such debit notes are issued when the amount of tax charged is lower than the actual amount of tax payable and also when the taxable value in the invoice is lower than the actual amount of taxable value. Debit note is received from the GST-registered business because goods worth $8,000 is rejected then it means the value of the taxable invoice increases when the amount of goods rejected are not adjusted from the taxable invoice. In such case a debit note is issued by the business firm to the customer. The journal entry for issuing debit note in GST is as follows:

ZXC A/c                     Dr. $9,120

       To Sales A/c                                Cr. $8,000

      To Output CGST                         Cr. $560

      To Output SGST                          Cr. $560

(Being debit note issued)

PART – 2)

Credit notes are issued when there is shortage of supply of products and for those products in which no payment is processed by the purchaser. Credit notes are opposite to debit notes and is issued when the amount of tax charged is greater than the actual amount of tax payable and also when the taxable value in the invoice is greater than the actual amount of taxable value. It can also be issued when the goods are return and the products are deficient or not up to the satisfaction level of the purchaser. The credit note is issued by the business firm of $8,000 when the above case is replaced. The journal entry for issuing credit note in GST is as follows:

Sales A/c                                             Dr. $8,000

Output CGST A/c                               Dr. $560

Output SGST A/c                               Dr. $560

                   To ZXC A/c                                             Cr. $9,120

(Being credit note issued)

Note: GST rate in Singapore is 7%.