ACCT1101

 
 

Summary  2  
Week  5  –  developing  a  business  plan  
 
• Essential  for  obtaining  finance  
• Identify  a  business  opportunity  and  develop  a  plan    
• 1st  section:  Description  of  the  business  
o How  the  business  is  organised  e.g.  sole  proprietor,  company,  etc.  
o Its  product(s)  or  service(s)  
o Where  it  is  located  and  where  it  conducts  its  business  
o Management  team  
o Business  objectives  clearly  stated  and  linked  to  the  loan  purpose    
• Marketing  plan  –    
o How  the  business  will  make  sales  and  how  it  will  influence  and  
respond  to  market  conditions  
o Develop  a  case  for  the  loan  application  –  identify  increased  
demand  and  competitive  advantage  
• Operating  plan  
o How  the  business  will  develop  and  enhance  its  products/services  
o Relationships  with  customers/suppliers  
o How  does  business  generate  revenue?  
o How  reliant  on  key  suppliers?  Other  external  factors?  
• Environmental  management  plan  
o resource  efficiency,  health  and  safety  issues  plus  social  impacts  
o e.g.  ethical  relationships  with  reliable  and  socially  responsible  
suppliers/importers  
• Financial  plan  
o When  did  it  begin  operating,    
o Income  statements,  balance  sheets  and  cash  flow  statement  for  the  
most  recent  financial  years  follow  
o Cash  collected,  purchases  budget,  operating  expenses  budget,  
income  statement,  cash  budget,  balance  sheet,  historical  info.  
o Need  to  see  longer  term  forecasts  to  assess  viability  of  the  loan  
o Also  need  to  determine  sensitivity  of  forecasts  to  changes  in  the  
assumptions  
• Executive  summary  
o The  purpose  of  the  business  plan  
o The  proposed  changes/future  actions  for  the  business  
o The  likely  success  of  the  loan  proposal  on  the  basis  of  budgeted  
and  actual  financial  statements  
 
 
ACCT1101  
 

Week  6  –  working  capital  

 
• Working  capital  =  excess  of  current  assets  over  current  liabilities  
• Current  assets  are  those  assets  that  the  business  expects  to  convert  into  
cash,  sell  or  use  up  within  one  year  (e.g.  cash,  accounts  receivable,  
inventories)  
• Current  liabilities  are  liabilities  the  business  expects  to  pay  within  one  
year  (e.g.  bank  overdraft,  accounts  payable)  
• Working  capital  refers  to  the  net  resources  managers  have  to  work  with  
in  the  business’  day-­‐to-­‐day  operations  
• Too  little  working  capital  and  the  business  risks  insufficient  liquidity  
(can’t  pay  its  bills)  
• Too  much  and  the  business  is  not  making  the  most  of  its  resources  (low  
returns  on  excess  cash)  
• Internal  controls  are  the  policies  and  procedures  that  direct  how  
employees  should  perform  a  business’  activities  
• Cash  and  cash  controls:  
o Money  on  hand,  bank  deposits,  cheques  and  credit  card  invoice  
receipts  received  from  customers  but  not  yet  deposites  
o A  cheque  is  a  written  order  directing  a  bank  to  pay  out  money  to  a  
designated  payee.  
o The  bank  takes  the  money  from  the  payer’s  account,  first  checking  
that  there  are  sufficient  funds  to  cover  the  amount  of  the  cheque.  
This  is  ‘clearing’  the  cheque.  
o If  there  are  not  sufficient  funds  (NSF)  in  the  payer’s  account  to  
cover  the  amount  of  the  cheque,  the  cheque  is  ‘dishonoured’    and  
the  payment  is  not  made.  
o Cheque  accounts  are  common  in  business  –  convenient  and  secure  
compared  to  receiving  and  paying  in  cash.  
o Time  delay  for  actual  movement  of  funds  while  the  bank  ‘clears’  
the  cheque  
o Online  banking  (direct  transfer  of  funds  from  one  account  to  
another  via  the  internet).  Faster,  accounting  system  tracks  online  
transfers  
o Cash  sales:  make  sure  receipts  are  properly  recorded  to  protect  
form  theft  or  loss  –  authorisation,  source  documents  and  recording  
o Bank  independently  keeps  track,  business  keeps  own,  A  bank  
reconciliation  involves  comparing  the  bank  statement  cash  balance  
to  the  business’    own  cash  account  balance  and  identifying  the  
differences  if  any  
o A  petty  cash  fund  is  a  specified  amount  of  money  under  the  control  
of  one  employee  that  is  used  for  making  small  cash  payments  for  
the  business  
• Accounts  receivable:  
o Accounts  Receivable  represents  amounts  owed  to  a  business  by  its  
customers  for  previous  credit  sales  
o The  decision  to  extend  credit  (allow  customers  to  receive  their  
goods  or  services  now  and  pay  later)  is  a  business  decision  
ACCT1101  
 
o Benefits  of  extending  credit  (increased  sales)  trades  off  against  
costs  (costs  of  credit  checks  and  account  management,  costs  of  bad  
debts)  
o Controls:  credit  application  and  check,  monitor  individual  credit  
customer  balances  and  following  up  for  timely  payment,  total  
accounts  receivable  balance  monitored  
• Accounts  payable:  
o Businesses  often  purchase  goods  or  services  on  credit,  which  
results  in  the  liability  ‘Accounts  Payable  –  convenient  and  better  
cash  management  
o Short  term  liability  
o Authority  to  incur  limited  to  a  small  number  of  employees  
o Paid  on  time  and  recorded  
o Total  should  be  monitored  over  time  
• Inventory:  
o Merchandise  held  for  resale  
o Accounting  system  monitors  inventory  balances  and  COGS  
o Physical  controls  (security),  purchase  orders  and  physical  count  
o Ending  inventory  and  COGS  are  reported  as  dollar  amounts  in  the  
financial  statements  
o Need  to  determine  the  cost  of  the  units  sold  during  the  period  and  
the  cost  of  units  left  in  ending  inventory  
o Specific  identification  technique:  individually  track  each  unit  
o FIFO:  always  sell  oldest  inventory  first  
 
 
Chapter  6  notes:  
• A  business’  working  capital  is  the  excess  of  its  current  assets  over  its  
current  liabilities.    
• The  current  asset  section  of  a  business’  balance  sheet  includes  assets  
that  the  business  expects  to  convert  into  cash,  sell  or  use  up  within  one  
year.    
• The  Current  liability  section  includes  liabilities  that  it  expects  to  pay  
within  one  year  by  using  current  assets.    
• The  term  working  capital  represents  the  net  resources  that  managers  
have  to  work  with  in  the  business’  day-­‐to-­‐day  operations.    
• What  is  an  appropriate  amount  of  working  capital  for  a  business?  It  is  
enough  to  finance  its  day-­‐to-­‐day  operating  acitivites  plus  an  extra  amount  
in  case  something  unexpected  happens.    
• Not  enough  –  risks  not  having  enough  liquidity  
• Too  much  –  risks  not  putting  its  resources  to  their  best  use.    
• An  internal  control  structure  is  a  set  of  policies  and  procedures  that  
directs  employees  on  how  they  should  perform  a  business’  activities.    
• Cash  includes  money  on  hand,  deposits  in  cheque  and  savings  accounts,  
and  cheques  and  credit  card  invoices  that  it  has  received  from  customers  
but  not  yet  deposited.  Cash  includes  anything  that  a  bank  will  accept  as  a  
deposit.  
• Cash  controls  –  internal  controls  over  1)  cash  receipts  and  2)  cash  
payments.    
ACCT1101  
 
o Cash  receipts:  result  from  cash  sales  and  collections  of  accounts  
receivable.    
o Proper  use  of  a  cash  register  
o Make  sure  that  when  a  cheque  is  accepted  for  payment,  the  
salesperson  makes  sure  that  the  customer  has  proper  
identification  in  order  to  minimise  the  likelihood  that  the  cheque  
will  bounce.    
o At  the  end  of  the  day,  the  employee  should  match  the  total  of  the  
amounts  collected  against  the  total  of  the  cash  register  tape  and  
report  any  difference.    
o Deposit  all  cash  receipts  daily.  Take  all  cash,  fill  out  a  deposit  slip  
and  make  a  deposit.  This  helps:  1)  minimise  risk  of  theft  and  2)  
show  the  business’  cash  receipts  for  the  day  in  deposits  –  can  
reconcile  deposits  with  cash  account  to  determine  that  it  deposited  
all  its  recorded  cash  receipts  in  the  bank  and  that  it  properly  
recorded  all  bank  deposits  in  its  cash  account.    
• Cash  payments  controls  
o Have  all  payments  authorised  before  they  are  made.    
o Pay  only  for  approved  purchases  that  are  supported  by  proper  
documents.    
o Stamp  PAID  on  supporting  documents  
• Bank  reconciliation:  Use  bank  statement  and  compare  to  cash  account  
ending  balance  –  enables  to  report  correct  cash  balance  on  balance  sheet.    
o Deposits  in  transit:  a  cash  receipt  that  the  business  has  added  to  its  
cash  account  but  the  bank  has  not  included  it  in  its  cash  balance  
reported  on  bank  statement.    
o Outstanding  cheques:  a  cheque  that  the  business  has  written  and  
deducted  from  its  Cash  account  but  that  the  bank  has  not  yet  
deducted  from  bank  statement  because  the  cheque  has  not  yet  
cleared  the  bank.    
o Deposits  made  directly  by  the  bank:  interest  
o Charges  made  directly  by  the  bank:  service  charge  
o Errors:  deposits  in  wrong  account,  amount  error  etc.    
o Formula:  
§ Ending  cash  balance  from  bank  statement  
§ +  deposits  in  transit  
§ -­‐  outstanding  cheques  
§ +/-­‐  errors  made  by  bank  
§ =  ending  reconciled  cash  balance  and  ending  cash  balance  
from  business  account.    
§ Also  +  deposits  made  directly  by  the  bank  
§ -­‐charges  made  directly  by  the  bank  
§ +/-­‐  errors  made  by  the  business  
§ =  ending  reconciled  cash  balance  
• Accounts  receivable:  the  amounts  owed  to  a  business  by  customers  from  
previous  credit  sales.    
• A/C  receivable  controls:    
o Before  extending  credit,  ensure  that  a  customer  is  likely  to  pay.  
Complete  a  credit  application  
ACCT1101  
 
o Monitor  the  A/C  receivable  balances  of  its  customers.    
o Monitor  total  A/C  receivable  balance  
• Inventory:  the  merchandise  being  held  for  resale  
o Control  the  ordering  and  acceptance  of  inventory  deliveries.  A  
purchase  order  is  a  document  authorising  a  supplier  to  ship  the  
items  listed  on  the  document  at  a  specific  price.    
o Establish  physical  controls  over  inventory  
o Periodically  take  a  physical  count  of  inventory  
o Multiply  COGS  x  quantity  =  cost  of  inventory,  then  add  beginning  
inventory,  add  purchased  items  and  take  sold  items  to  determine  
value  of  ending  inventory.    
o Specific  identification  method:  allocates  costs  to  COGS  and  to  
ending  inventory  by  assigning  to  each  unit  sold  and  to  each  unit  in  
ending  inventory  the  cost  to  the  business  of  purchasing  that  
particular  unit.    
o Also  consider  differences  for  FIFO  and  LIFO  methods.    
• Accounts  Payable  –  the  amounts  that  a  business  owes  to  its  suppliers  for  
previous  credit  purchases  of  inventory  and  supplies.    
• Ability  of  employees  to  make  the  business  responsible  for  A/C  payable  
• Make  payment  at  the  appropriate  time  and  supplier  records  each  
payment  properly    
• Monitor  balance  –  could  cause  liquidity  problems  if  payable  is  more  than  
assets.  
ACCT1101  
 

Week  7  –  Income  statement  

 
• Reports  a  business’  revenues,  expenses  and  net  income  or  (net  loss)  for  a  
specific  time  period  
• Summarises  the  results  of  a  business’  operating  activities  for  a  specific  
time  period  
• These  operating  activities  stem  from  planning  and  operating  decisions  
made  during  the  period  
• Shows  the  relationship  between  managers’  decisions  and  the  results  of  
those  decisions  
• Use  to  evaluate  business  performance  

 
 
• Net  Income  =  Revenues  –  Expenses  
• Sales  Revenues  are  the  amounts  earned  by  the  business  from  the  sale  of  
goods  or  services  for  a  period  
• increases  in  assets  (cash  or  accounts  receivable)  or  decreases  in  liabilities  
(unearned  revenues)  
• Three  types  of  sales  policies  (can  affect  revenues):  
• Discounts  
o Attract  customers  and  increase  sales  
o Discounts  for  large  quantities  or  prompt  and  immediate  cash  
payment  
o Sales  revenue  is  reduced  by  the  amount  of  the  quantity  or  cash  
discount  when  the  discount  is  taken  
• Sales  returns  
o Customers  are  able  to  return  goods  for  refund  if  they  are  damaged  
or  unacceptable  in  some  other  way  
o A  sales  return  occurs  when  a  customer  returns  previously  
purchased  merchandise  for  a  full  refund  
ACCT1101  
 
o A  sales  allowance  occurs  when  a  customer  agrees  to  keep  the  
merchandise  and  the  business  refunds  a  portion  of  the  original  
sales  price  
o Sales  returns  and  allowances  reduce  total  sales  revenue  
• Sales  allowances  
o Sales  Revenue  for  the  period  less  all  discounts,  returns  and  
allowances  for  the  period  
o Total  discounts,  returns  and  allowances  is  often  reported  
separately  on  the  Income  Statement  prepared  for  internal  users  
o Changes  in  the  level  of  discounts,  returns  and  allowances  can  
provide  important  information  about  pricing  and  quality  control    
o Less  common  to  report  this  information  to  external  financial  
statement  users  
• Expenses  
o Expenses  are  the  costs  a  business  incurs  to  provide  goods  or  
services  to  its  customers  during  an  accounting  period  
o Major  expense  of  a  retailing  business  is  Cost  of  Goods  Sold  (COGS)  
o The  type  of  inventory  system  used  by  the  business  will  determine  
how  it  calculates  COGS  
• Inventory  systems:  
o Inventory  systems  deal  with  how  inventory  and  COGS  are  
recorded.    
• Perpetual  inventory  system:  
o Keeps  a  continuous  record  of  the  cost  of  inventory  on  hand  and  the  
cost  of  inventory  sold  
o Purchases:  the  asset  inventory  is  increased  (the  other  side  will  be  a  
decrease  in  cash  or  an  increase  in  accounts  payable)  
o Sales:  inventory  is  decreased  and  COGS  increased  by  the  cost  of  the  
goods  sold  
o the  balance  of  inventory  and  COGS  is  always  up  to  date  
o Need  to  confirm  the  ‘theoretical’  inventory  on  hand  as  determined  
by  the  perpetual  system.  This  is  done  by  a  periodic  physical  count  
of  inventory,  Any  differences  between  actual  and  theoretical  
inventory  (such  as  inventory  spoilage  or  theft)  are  recognised  in  
the  accounting  system  at  this  time  
• Periodic  inventory  system:  
o Determines  the  inventory  on  hand  at  the  end  of  every  accounting  
period  by  physically  counting  it  
o Inventory  is  not  changed  when  a  purchase  or  sale  occurs.  The  only  
way  to  know  how  much  inventory  is  on  hand  is  to  count  it.  
o COGS  is  determined  at  the  end  of  the  period  on  the  basis  of  the  
physical  stocktake  
o Less  inventory  control  than  a  perpetual  system  and  can  be  time-­‐
consuming  and  costly  to  stocktake    
• The  cost  of  each  unit  of  inventory  includes  all  the  costs  incurred  to  bring  
the  item  to  its  existing  condition  and  location  
Inventories  shall  be  measured  at  the  lower  of  cost  and  net  realisable  
 
•
value (the  selling  price  of  the  inventory  less  the  selling  costs)  
ACCT1101  
 
o If  the  carrying  amount  (its  value  on  the  balance  sheet)  of  inventory  
is  greater  than  its  net  realisable  value,  the  value  of  the  inventory  
must  be  adjusted  downwards  against  profits  by  the  relevant  
amount    

 
• Specific  Identification  involves  the  identification  of  the  actual  units  of  
inventory  purchased  and  sold.    Makes  sense  for  high  value  inventory  with  
unique  identifiers,  e.g.  luxury  cars  or  jewellery.  Time  consuming  and  
costly  where  inventory  consists  of  many  small  value  units.  
• First  in  First  Out  (FIFO)  assumes  that  the  oldest  units  of  inventory  are  
sold  first.    FIFO  matches  the  physical  flows  of  inventory  in  many  cases,  
especially  where  inventory  is  perishable.    
• Average  Cost    involves  combining  the  cost  of  all  the  units  available  for  
sale,  calculating  the  average  cost  per  unit  then  allocating  that  cost  
between  COGS  and  ending  inventory.    Again  many  situations  where  this  
assumption  maps  to  the  physical  flow  of  inventory  e.g.  oil,  grain.  
• 4.  Last  in  First  Out  (LIFO)  assumes  the  most  recently  purchased  
inventory  is  sold  first.  LIFO  is  permitted  in  the  U.S.  under  certain  
circumstances  but  is  not  permitted  for  use  in  Australia.  
• Profit  Margin  =  Net  Income/Net  Sales  
• Gross  Profit  Percentage  =  Gross  Profit/Net  Sales  
• External  users:  The  Statement  of  Comprehensive  Income  is  effectively  the  
income  statement  plus  all  ‘other  comprehensive  income’  (income  and  
expense  (including  reclassification  adjustments)  that  are  not  recognised  
in  profit  or  loss  as  required  or  permitted  by  other  Australian  Accounting  
Standards).    
•  
 
ACCT1101  
 

Week  8  –  The  Balance  Sheet  

 
• The  balance  sheet  (or  statement  of  financial  position)  is  a  financial  
statement  that  reports  the  types  and  monetary  amounts  of  a  business’  
assets,  liabilities  and  owners’  equity  at  a  specific  date  
• The  balance  sheet  is  a  representation  of  the  accounting  equation:  
o Assets  =  Liabilities  +  Owners’  Equity  
• Reports  for  a  specific  point  in  time  
• Report  form:  all  down  
• Accounting  form:  assets  on  left,  OE  and  L  on  right  
• Assets  are  a  business’  economic  resources  that  it  expects  will  provide  
future  economic  benefits  to  the  business  
• We  classify  assets  on  the  Balance  Sheet  by  their  nature/function  and  by  
the  timing  of  their  future  economic  benefits  
• Current  assets  (those  assets  expected  to  be  converted  to  cash  or  
consumed  within  the  next  12  months)  are  classified  separately  to  non-­‐
current  assets  
• Current  assets  (those  assets  expected  to  be  consumed  or  converted  to  
cash  within  the  next  12  months)  are  usually  listed  on  the  Balance  Sheet  in  
order  of  liquidity  
• Non-­‐current  assets  are  those  assets  the  business  expects  to  hold  for  
longer  than  12  months  
o Financial  assets  such  as  bonds,  shares  held  in  other  companies  and  
notes  receivable  can  be  non-­‐current  assets  if  the  business  intends  
to  hold  the  asset  for  longer  than  12  months  
o Property  and  equipment  includes  all  the  physical,  long  term  assets  
used  in  the  operations  of  a  business  
o Property  and  equipment  also  referred  to  as  fixed  assets  
o Intangible  assets  are  assets  that  have  no  physical  substance  such  
as  trademarks,  copyrights,  patents,  brand  names  and  goodwill  but  
still  carry  future  economic  benefits.    
• Depreciation  
o Many  non-­‐current  assets  are  subject  to  depreciation  
o Depreciation  expense  is  the  portion  of  the  asset’s  value  that  has  
been  used  up  to  generate  revenue  in  the  current  period  
o Accumulated  depreciation  is  the  portion  of  the  asset’s  value  that  
has  been  used  up  to  generate  revenue  to  date  
o The  net  book  value  of  the  asset  (cost  less  accumulated  
depreciation)  represents  the  unused  portion  of  the  asset’s  value  
o Straight  line  method:  (Asset  Cost  –  Residual  Value)/Useful  life  in  
years  
o Residual  value  is  the  salvage  value  of  the  asset  –  how  much  the  
business  could  get  for  the  asset  at  the  end  of    its  useful  life  
o If  the  asset  is  held  for  part  of  the  year  then  the  annual  depreciation  
is  adjusted  to  reflect  this  
o The  accumulated  depreciation  is  reported  on  the  balance  sheet  
under  the  asset  group  to  which  it  relates  
ACCT1101  
 
o Non-­‐current  assets  such  as  property  and  equipment  are  initially  
recorded  on  the  balance  sheet  at  their  historical  cost  to  the  
business  
o In  Aus  revaluing  is  allowable  (but  not  in  this  subject)  
• Liabilities  are  the  economic  obligations  (debts)  of  a  business.  Classified  on  
the  balance  sheet  according  to  when  they  will  be  paid  
o Current  liabilities  are  obligations  that  the  business  expects  to  pay  
within  12  months  
o Non-­‐current  liabilities  are  obligations  that  the  business  does  not  
expect  to  pay  within  the  next  12  months  
• Owner’s  Equity  
o Owner’s  Equity  is  a  residual  claim  on  the  business  representing  the  
owner’s  current  investment  in  the  net  assets  (assets  minus  
liabilities)  of  the  business  
o Called  Shareholders’  Equity  for  a  company  and  Partners’  Equity  for  
a  partnership  
o Owner’s  Equity  is  a  residual  claim  because  creditors  (parties  owed  
money  by  the  business)  have  first  legal  claim  to  the  business  assets  
o The  capital  invested  by  the  owner,  the  profits  earned  by  the  
business  and  the  withdrawals  of  capital  (drawings  or  dividends)  
all  affect  Owner’s  Equity  
o The  Statement  of  Changes  in  Owner’s  Equity  summarises  the  
transactions  affecting  Owner’s  Equity  for  the  accounting  period  
• Liquidity  
o Liquidity  is  a  measure  of  how  quickly  a  business  can  convert  its  
assets  into  cash  to  pay  its  bills  
o Two  ratios  to  assess  liquidity:  
o Current  Ratio  =  Current  Assets/Current  Liabilities  
o Quick  Ratio  =  Quick  Assets/Current  Liabilities  
o Suggested  benchmark  for  Current  Ratio  is  2  (twice  as  many  
current  assets  as  current  liabilities)  
o Suggested  benchmark  for  Quick  Ratio  is  1  (quick  assets  cover  
current  liabilities  
o Need  to  consider  industry  factors  and  operating  cycle  when  using  
benchmarks  
• Financial  flexibility  
o Financial  flexibility  refers  to  the  ability  of  a  business  to  adapt  to  
change  
o Businesses  with  financial  flexibility  can  expand  or  contract  their  
operating  activities  as  needed    
o We  use  a  business’  debt  levels  to  evaluate  financial  flexibility  
(sometimes  called  gearing  or  leverage)  with  the  following  ratio:  
o   Debt  Ratio  =  Total  Liabilities/Total  Assets  
o The  higher  the  debt  ratio,  the  lower  is  the  business’  financial  
flexibility  
o The  debt  ratio  measures  the  percentage  of  the  firm’s  assets  that  
are  financed  by  debt  rather  than  by  the  owners’  equity  
o A  low  debt  ratio  therefore  indicates  that  the  business  is  able  to  
borrow  more  easily  and  has  greater  financial  flexibility  
ACCT1101  
 
• Profitability  
o Return  on  total  assets  =  (Net  Income  +  Interest  Expense)/Average  
Total  Assets  
o 2.  Return  on  owners’  equity  =  Net  Income/Average  Owners’      
Equity  
o benchmark  this  against  budgeted  profit  and  also  similar  
businesses  in  the  industry  
• Operating  capability  
o Operating  capability  refers  to  a  business’  ability  to  sustain  a  given  
level  of  operations  
o We  evaluate  operating  capability  through  activity  ratios  that  are  
provide  a  measure  of  the  length  of  parts  of  the  business’  operating  
cycle  
o The  ratios  are:  
Inventory  turnover     =  COGS/Average  Inventory  
Days  in  selling  period     =  Number  of  days  in  business  year/  
               Inventory  turnover  
AC  receivable  turnover   =  Net  credit  sales/Average  AC    
             receivable  
Days  in  collection  period   =  Number  of  days  in  business  year/    
             AC  receivable  turnover  
o Turnover  –  reasonable  for  business?  
• BAS  Statements  
o A  Business  Activity  Statement  (BAS)  is  a  form  used  to  report  
business  Goods  and  Services  Tax  (GST)  and  Pay  As  You  Go  (PAYG)  
Tax  to  the  Australian  Taxation  Office  (ATO).  
o The  BAS  is  used  to  record  the  amount  of  input  tax  credits  for  GST  
included  in  the  price  paid  for  business  inputs  such  as  inventory.  
This  is  GST  Paid.  
o The  BAS  is  also  used  to  record  the  amount  of  GST  payable  on  
taxable  sales  made.  This  is  GST  Collected.  
o If  GST  Collected  >  GST  Paid,  the  resulting  GST  liability  must  be  paid  
to  the  ATO.  
o If  GST  Paid  >  GST  Collected,  the  resulting  tax  credit  will  be  
refunded  by  the  ATO.  
o Pay  As  You  Go  (PAYG)  is  the  tax  on  employee  salaries  that  is  
‘withheld’  from  their  net  pay  and  remitted  to  the  ATO  
o Employer  businesses  periodically  report  and  remit  PAYG  tax  
withheld  to  the  ATO  using  a  BAS