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Assessment Task 1
1. Explain the basic principle of double entry bookkeeping
The basic principle of the double entry bookkeeping concept and the system is that for every transaction there is a debit entry and a corresponding credit entry. Both the entries will be of equal amount which means that if the debit entry is of $100, then the corresponding credit entry will be also of $100. One entry will be known as debit entry while the other will be automatically is adjusted as the credit entry. These entries are generally displayed in the T-format as below:
2. Describe the principle of cash accounting and one advantage and one disadvantage of this method of accounting
In cash accounting, the payments receipts which are actually incorporated and are recorded during the period when they are received while the expenses are recorded during the period when they are actually paid. The cash accounting system is known as the cash basis accounting and it is one of the two forms of accountings. The other form of accounting is accrual accounting where the recording of the revenue and expenses are done when they are incurred. Of the two accounting methods cash accounting is much simpler and easier for the small and medium than the accrual form of accounting as it illustrates the actual picture of the money the business has in the hand actually. But, as per the accounting guidelines of the Generally Accepted Accounting principles (GAAP), the companies needs to use accrual form of accounting for the purpose of recording transactions.
The advantage of cash accounting is that the maintenance of cash accounting is simple and easy. The revenue is recorded in the books of accounts when the amount is received from the customers while it is recorded as the expenses when the same is paid to the suppliers.
The major disadvantage of cash accounting is that it is not recognised as per the GAAP and under the methods prescribed by the Companies Act. Therefore, it cannot be practiced by the bigger companies.
3. Describe the principle of accrual accounting and one advantage and one disadvantage of cash accounting
Accrual accounting is where the recording of the revenue and expenses are done when they are incurred. It happens when the money exchanges hand. When a customer purchase $100 of merchandise and the item is billed, even though the money is not received, the sale will be recorded in the accounting system immediately. Similarly, the expenses are also treated in the same manner.
Advantages: It provides and accurate picture of the overall cash flow generated from the business. There are many businesses which occurs over a period of several months and hence spread over several accounting periods.
Disadvantages: The knowledge and skills of the staffs may be too small to manage the accounting method. For larger companies since there is more number of staffs, it may not be such difficult to manage.
4. Explain the two accounting principles on which the calculation and reporting of deprecation is based
The calculation and reporting of the depreciation is based upon two accounting principles:
1. Cost principle which requires that the depreciation expenses to be recorded on the income statement while the amount of asset to be reported in the balance sheet. All the recording must be conducted at the historical cost of the assets.
2. Matching principle which requires that the cost of the assets to be allocated to the Depreciation Expenses over the life of the assets. Thus the cost of assets is divided up by the sum of costs being reported on each of the income statement which is issued during the life of the assets. Therefore, by assigning a portion of the asset’s cost with each period to the various income statements, the accountant is trying to match a portion of the cost of asset with each period in which the asset is used.
5. Identify and explain three key features of A New Tax System (GST) Act 1999
It is a new tax system and adds more information related to the goods and services in the tax invoices.
It focuses on the financial supplies which are taxed under the GST Act. The new tax system is in charge of finding the actual supplies which are considered financial for the resolution of goods and services act.
It also records the credit transactions during the acquisition and it also leads to the privilege of reducing the tax input credits. This also illustrates the percentage of reduction.

6. Identify and then explain the four main taxation and superannuation obligations for a business. Briefly discuss each obligation
The four different forms of taxation ad superannuation obligations for the business are as follows:
1. Fringe Benefit Tax (FBT): It is the essential part of the business and is useful for attracting quality and skilled employees in the organization. But, there is need to provide taxes on the fringe benefits provided to the staffs. Thus, it is the taxes paid by the employers on the benefits provided to the employees.
2. Income tax for business: Taxes are levied on the business and are calculated as income less any allowable deductions. Assessable income is the income which the business earns annually but does not include the GST payable on sales that are made or any GST credits.
3. Capital Tax gains (CGT): It is the tax which is paid on any capital gains by the individuals. It’s a part of the income tax. By selling assets such as vehicles or property the gains made in the form of capital generation is called capital gains.
4. Payroll Tax: Payroll tax is the amount of tax which is paid by the employer on the amount of wages and is calculated based on the amount of wages paid per month and collected from the states or territories where the employees are located.
7. According to GST legislation, list four items that do not attract GST
The items which are excluded from GST are food items, education courses, medicines, healthcare products and some services.
· Most basic food
· Education courses, study materials and related expedition trips
· Medical and healthcare services
· Menstrual products with effect from 1 January 2019
· Medical aids and appliances as well as some medicines
· Childcare services
· Finally religious and charitable activities
8. Explain the process by which a business reports GST to the Australian tax office
The GST reporting and payment cycle are as follows:
Monthly – if your GST turnover is $20 million or more.
Quarterly – When GST turnover is less than $20 million – and when there is no requirement to produce monthly reports.
Annually – if the business is voluntarily registered for GST. Which means the business is registered for GST; and the GST turnover is under $75,000 ($150,000 for not-for-profit bodies).
9. What is the penalty rate to be applied if a supplier does not provide an ABN?
If the suppliers do not quote their Australian Business Number (ABN) to the various organisations and the organizations are not satisfied that one of the exclusions applies, then companies must withhold 47% as penalty rate with effect from 1 July 2017 of the total payment.
10. A non-profit organisation needs to register for GST after it has a turnover of more than how much?
Non-profit organisations must register for GST if their GST turnover is equivalent to $150,000 or more than that.
The organizations may also register themselves if their GST annual turnover is lower. If the organizations are registered for GST, then they must include 10% GST on all or most of the sales of its products.
11. List the key information that must be included on a tax invoice for sales of $1,000 or more?
The key information which must be included on a tax invoice for sales on an amount of $1000 or more are the tax invoice. The name of the seller, Australian Business Number (ABN), Date of the purchase, the quantity of items or products purchased, Name of the products, the total amount or price and the GST included.
12. Identify and explain three types of financial statements and their purpose
The three important financial statements and their purpose are explained below:
1. Income Statement: It informs the stakeholders of the company about the company’s ability to generate profits. It also states the sales volumes made, the nature and the types of expenses, the ways the expenses are aggregated. If the income statement is evaluated over a period of time, it reflects the company’s trend in terms of sales and profitability.
2. Balance Sheet: It enables the reader like the stakeholders of the company about the current position of the business as on the date listed for which the balance sheet is prepared. It also helps to estimate the liquidity, funding, debt position of the equity and analyse the liquidity position of the company.
3. Cash Flow Statement: It shows the cash...