Accounting Question?

Question

If you have a customer returning something, would you use GST payable or GST recoverable?

E.g.

Damage merchandise was returned by G.Zahn. Credit Invoice 92 was issued today for $114 ($6 GST and $8 PST, $100 merchandise)

Answer 1

When you made the sale, your entries were:
Dr Accounts receivable $114
Cr Sales $100
Cr GST payable $6
Cr PST payable $8

Now that the customer is returning the damaged goods and you're effectively cancelling the sale, you'd just reverse the above entries, i.e., you'd debit GST payable. The general idea is to arrive at the scenario as if the sale had never been made.

Answer 2

When you sell the customer goods, you are Crediting GST payable because you have to pay the GST to the tax authority. Hence, it's akin to owing someone money, therefore a credit.

So when a customer return the goods, you need to reverse the entries and so you debit GST Payable.