Small business accountant in Melbourne on choosing the right accounting method for your small business
When choosing the appropriate accounting method for your company, you’ll need to ensure that it adheres to this method for the entirety of the financial year. The two methods for GST are: a cash basis or a non-cash basis (accruals), the method you use will come into affect when you must report GST. This is where you will need a small business accountant in Melbourne to help you derive these situations.
Most businesses with an aggregated turnover of less than $2 Million, or use cash accounting for income tax have the ability to use both methods, while larger companies with a turnover of more than $2 Million must use the non-cash basis method.
When using the cash basis method for accounting, you are liable for the GST on the business activity statement that covers the period in which you made the sales and purchases. The advantage you gain from using this method is that all money that is currently flowing through your business has the ability to be allied with your activity statement liabilities, as your cash flow is easier to manage. You can always ask our business accountant in Melbourne for some help with using the cash basis method.
On the other hand, the non-cash basis method means that you account for the GST on the business activity statement, if an invoice was sent or the payment was received or on the other hand, if you have received an invoice from a supplier and sent a payment to the supplier. Regarding your sales when using a non-cash basis, you are liable for the GST sales you make that are recorded. But when looking at your purchases, you must have received a tax invoice before you can claim a GST credit, which can easily be established by one of our small business accountants.
So not knowing which method would suit your company the best, is a likely occurrence we face and would be more than happy to help. Feel free to contact m.a.s accountants, small business accountants in Melbourne for some advice or extra information about our services.