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How to post a debtor adjustment to capture missing GST

Background: If a debtor receipt is posted prior to the rendering of a bill, it will have a zero GST component. Because the GST component of an invoice is not necessarily 10% of the total, receipt allocation must be used to calculate the correct GST figure. With no bills to allocate the receipted funds to, ContactsLaw will assume that there is no GST implication for receiving the funds. Unallocated funds may also occur if a bill is subsequently deleted, or if the dates on transactions are manipulated, changing their sequence. In order to comply with ATO requirements, all GST recovered from invoice payments must be captured - to assist in this, ContactsLaw provides the debtor adjustment journal, which can be used to account for GST missed due to the above accounting errors.

  1. At the file level, open the ledgers tab then select the debtors ledger. If there are unallocated funds there will be a red notification at the top right hand corner of the ledger. (Note that the presence of unallocated funds on a file may not necessarily indicate a problem with allocations; there are other legitimate cases in which funds remain unallocated.)

  2. Identify which deposited funds are unallocated. Usually, these are funds that are paid “on account” (i.e. no bill number), bear a $0 GST component and result in a negative debtor balance on the file.

  3. Also identify the bill that the unallocated funds should be allocated to. This should be the bill immediately following the deposit. If it is not, review and amend how subsequent deposits have been allocated to make this occur.

  4. Click the “debtor adjustment” button on the ribbon. The debtor adjustment screen will appear.

  5. Change the transaction date to the date of the bill that the funds should be allocated to. If the bill falls within a GST period for which a BAS has already been posted, stop and determine whether it will be necessary to lodge an adjustment to the BAS. It may be possible to account for the missing GST in the current period instead.

  6. Select the 'debit one account, credit multiple accounts' option, as we want to credit the GST account for each line of the transaction. The figures in the grid will change from black to red to confirm this.

  7. Select the 'adjust GST only' option. This will prevent ContactsLaw from affecting the balance on the debtors account.

  8. Click the allocation button (looks like “…”) which will open the debtor allocation editor. In the debtor allocation editor, apply the allocated funds to the correct bill by right clicking on the correct invoice number and entering the unallocated amount, then click OK.

  9. The fields 'related transaction', 'related document' and 'reference' should remain unchanged.

  10. Enter an appropriate description which details why the adjustment was posted.

  11. Review, and click Save & Close.

  12. In the debtors ledger there should now be a new entry for GST and the red notification should disappear. Note: Depending on how funds are allocated, the GST component of the adjustment transaction may differ from the GST component on the invoice. The sum of GST components on credits, however, should still equal the sum of GST components on debits.