With the understanding of GST / HST return from
CRA, I would like to open a topic to discuss whether or not the GST / HST return produced by Zoho Books is actually in compliant with CRA reporting requirement specifically on line 101 - Sales and other revenue.
Let's dive into the issue with example.
In Jul 2023, company A makes a credit sale of $100 and issues an invoice to a customer with 13% HST. So total invoiced amount is $113. Company A records the following entry upon invoicing.
Entry 1:
Dr Accounts Receivable $113
Cr Sales $100
Cr HST on Sales $13
As the invoice pertains to services relating to future period (say, Aug 2023), company A records the following entry to defer the revenue in Jul 2023.
Entry 2:
Dr Sales $100
Cr Deferred Revenue $100
At the end of Jul 2023, company A records "0" sales in the income statement and credit of $13 on "HST on sales" in balance sheet.
So now - When it comes to Jul 2023 HST filing, what does company A report on line 101 - Sales and other revenue?
Based on interpretation on CRA guidelines, two options:
- Report $0 on line 101 with $13 on line 103 as GST collected - This option takes into account of any manual journal adjustments to sales account when calculating the amount for line 101. GST / HST return produced by Zoho Books is following this logic.
- Report $100 on line 101 with $13 on line 103 as GST collected - This option DOES NOT take into account of any manual journal adjustment to sales account in line 101 calculation. Only "invoiced" sale figures are being reported. In my opinion, this appears to be the correct approach as the company A makes a sales of $100 with $13 HST collected and the reporting makes sense. Even CRA cross-checks between HST collected vs the sales, the numbers all tie up.
Now discussion and question to the community, Zoho reps and peer accountants:
- What would you report in line 101 for company A? Option 1 or 2?