Refunding an Expense - How do I cancel the GST?

Tracy.  I assume that there are two sides to this transaction - you as entity "A" and the "employer" as entity "B".  So, are you registered for GST in your own right, enabling you to claim the GST?  Or was entity "B" the only one registered for GST?
To give a simple answer, as you have accounted for GST in the purchase, you will need to account for GST also in the reimbursement, so that both will net out to the same amount.  That would then leave entity "B" as the ultimate claimer of GST on the reimbursement payment that they made back to your Paypal account.
John L G

Thanks John, that makes sense, but i am unsure how to go about this....
I am GST registered, so my tax report shows a GST liability for this purchase which i now need to cancel out.

Here's the details of the original purchase and refund:

I wrote a cheque for the item from my 'Paypal' Bank Account - ($519.95 inc GST) & attributed the purchase to my 'Business Purchase' Expense Account.


The refund has been entered as a Deposit into the 'Paypal' Bank Account
($519.95), and i have attributed the deposit back to my 'Business Purchase' Expense Account.



However, there does not seem to be any way to account for the GST portion of the refund on the Deposit.


SO...
I tried to make a General Journal Entry for the purchase & refund, this seemed to work....




but I am still left with the original cheque for the purchase.



Am I dealing with this the right way by making a General Journal Entry, & if so what do i do about the original cheque?

Thanks for your help with this

Hi Tracey.  You are on the right track and are very close.  Firstly, as you have found out, you cannot use Make Deposits to record any transaction which includes GST.  You could have used a Sales Receipt and made the deposit to your PayPal account, or you could have done the same transaction using a Journal Entry to record the original deposit back to your PayPal account.
There is only one thing that you have not done correctly with your attempts to correct the problem with your Journal.  Your journal entry shows a reversal of your original Make Deposits.  As the original entry, using your expense account of Business Purchase:..... was a credit without GST, so, in your correcting journal, the first line should not be showing GST (this is the full correction of your original entry).  The second line then is correct, because you are stating that this credit needs to attract GST.  Therefore, don't use any GST code in the first line (which is exactly what you did when you incorrectly used Make Deposits, and your GST sides will balance.
John L G

Thanks so much for your time, this is perfect.