WHAT IS THE DIFFERENCE BETWEEN CASH AND ACCRUAL ACCOUNTING?

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WHAT IS THE DIFFERENCE BETWEEN CASH AND ACCRUAL ACCOUNTING?

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You can account for GST either on a cash basis or an accrual basis. If you account on a cash basis, you account for the GST payable when you receive payment for a taxable supply, and claim input tax credits when you actually pay for acquisitions. In other words you cannot claim an input tax credit unless you have paid for the goods and services, and you do not have to pay the ATO the GST included in the price of a supply until you receive payment for that supply. You can use the cash basis of accounting if: your annual turnover is $1 million or less, or for income tax purposes you account for your income using the receipts method, or the Commissioner determines in writing that you may account on a cash basis. Charitable entities and gift deductible entities can account on a cash basis regardless of annual turnover. It may be an advantage to use a cash basis if you operate a small business and you use a cash basis of accounting for other purposes. If you give lengthy periods of credit,

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