How To Pass Accounting Entries Under GST?

Accounting entries refer to the recording of financial transactions in a company's books of accounts. With the introduction of the Goods and Services Tax (GST) in India, there have been changes in the accounting entries that businesses need to maintain. In this article, we will guide you on how to pass accounting entries under GST.

What is GST?

GST is an indirect tax levied on the supply of goods and services in India. It has replaced multiple taxes like excise duty, service tax, VAT, etc. GST is a destination-based tax, which means that the tax revenue is collected by the state where the goods or services are consumed.

What are the accounting entries that businesses need to maintain under GST?

Under GST, businesses are required to maintain the following accounting entries:

Invoice entry
Purchase entry
Payment entry
Journal entry

Invoice Entry

An invoice is a document that contains the details of the goods or services sold by a business. Under GST, every registered dealer is required to issue a tax invoice for the supply of goods or services. The tax invoice should contain the following details:

Name, address, and GSTIN of the supplier
Name, address, and GSTIN of the recipient
Invoice number and date
Description of goods or services
Quantity, unit of measure, and price of goods or services
Discounts, if any
GST rate and amount

When a business issues an invoice, the following accounting entry needs to be passed:

Debit: Customer's account
Credit: Sales account and GST payable account

Purchase Entry

Purchase entry refers to the recording of the purchase of goods or services by a business. When a business purchases goods or services, the supplier will issue a tax invoice. The tax invoice should contain the following details:

Name, address, and GSTIN of the supplier
Name, address, and GSTIN of the recipient
Invoice number and date
Description of goods or services
Quantity, unit of measure, and price of goods or services
Discounts, if any
GST rate and amount

When a business records a purchase entry, the following accounting entry needs to be passed:

Debit: Purchase account and GST input credit account
Credit: Supplier's account

Payment Entry

Payment entry refers to the recording of the payment made by a business to its suppliers. When a business makes a payment, the following accounting entry needs to be passed:

Debit: Supplier's account
Credit: Bank account

Journal Entry

Journal entry is used to record all the transactions that do not fall under the above categories. When a business records a journal entry, the following accounting entry needs to be passed:

Debit: One account
Credit: Another account

Conclusion

Passing accounting entries under GST is a crucial aspect of running a business in India. By maintaining accurate accounting records, businesses can comply with the GST regulations and avoid penalties. We hope this article has given you a clear understanding of the accounting entries that businesses need to maintain under GST.