Forum

• # 114931
• Thu 30 Mar 2017 12:16 PM

Hi,

Ive just started with a new client and they have 2 ltd companies. The parent company ( company A)  has been purchasing various items for company B as this one is quite new and hasnt much in the way of credit with suppliers. They also share premises and therefore share the costs of rent etc.

They have been using mainly excel speadsheets to do their accounts up until recently and have now moved to Sage50.

The way the account for these re-charges at the moment in Sage is Company A has a purchase account specifically for the items they want to re-charge to Company B and a sales account for when they invoice company B - so in effect they net each other out. They dont add any profit margin to the expenses incurred. 

The 2 companies arent linked within sage- both have their own account and VAt numbers.

My logical brain tells me this works fine, but there is something that doesnt quite sit right with me and I'm not sure what that is?!!

I have been trying to contact their accountant to ask their view on the situation, but it seems they are not easy to get hold of- and I'm keen to tidy up their accounts asap as VAT is due soon.

Does anyone know if this is the correct way to account for these re-charges? Any advice welcome. 

Thanks

Janette

• 
  Quote
  

• # 115589
• Wed 30 Aug 2017 12:17 PM

Hi Janette

I imagine you have worked this out by now but thought I would reply anyway.

I have a client who also does this in a similar way. There is not the supplier a/c in the company who purchases it is usually just a bank transaction which is posted to A/C 1103 prepayments, I will then raise an invoice on a customer a/c for the company that is to be re-charged again posting to 1103 which clears this account.  When pay back is received then the customer account is cleared.

In the company who is recharged there is a supplier a/c for the recharge purchase invoice being posted to the appropiate a/c.

I think the only reason we use 1103 is because there isn't much else in there and is therefore easy to keep track of, and we don't have too many of these transactions, if you have a lot of transactions then the supplier A/C in company A is probably a good idea.  I think the main thing would be to make sure you are not charging each company for the goods.

My client was an accountant himself so I am happy with this method for us.

Elaine

• 
  Quote