Invoicing another company

Invoicing another company

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I manage the accounts for two companies A & B. One company has a warehouse and all goods come into stock through Company A. Company B does not have its own warehouse or stock. Goods sold by Company B are purchased from Company A at no profit and a share of the overheads of Company A are invoiced to Company B. This allows for company B to prepare its own separate accounts but the disadvantage is that Company B has no stock and it makes it difficult to account for stock on a daily basis due to the daily invoicing from Company A. Does anyone know of a better way of handling this?

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By Democratus
14th Apr 2011 10:39

Eh!

Why does Company B have any stock at all, if it is purchasing from Co A stock that it is selling/sold to customers. Perhaps I have misunderstood.

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By oconnor_m2000
14th Apr 2011 10:47

Stock issues

Thanks for responding. Company B has no physical stock but it was set up to appeal to a different type of customer. As it owns no stock, it purchases it from Company A. Otherwise, we would have no way of recording cost of goods sold.

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By BigBadWolf
14th Apr 2011 10:51

One company?

why don't you just have one company - with two different trading names?

 

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By Democratus
14th Apr 2011 10:59

Ah

Still don't see why there is a stock problem?

Co B purchases from A at £100 plus £25 Overhead allocation and sell to Customer X for £150.

Jnl entries in B are

Cr Sales £150 - being Invoice value to Customer X

Dr Cost of Sales £100 - being stock purchased from Co A

Dr Overheads £25 - being administation costs incurred by Co A

No need for stock in Co B.

Co A will have to account for stock but that doesn't seem to be the crux of your query.

 

D

 

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By oconnor_m2000
14th Apr 2011 11:17

Stock issues

One company with two trading names seems the sensible option but it was set up before my time. The reason I was given was that if it was set up like this we would not know how well company B was doing or record profit. The main issue with stock is that we use SAGE and have thousands of different stocks of different sizes. I am concerned that this constant invoicing is leading to discrepancies e.g. where stock is allocated to a customer on company B but has not been invoiced, this does not show up on the stock level untill invoiced. This means we sit here trying to work out where the stock is gone. It is impractical to go through each order to find the stock.

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By Democratus
15th Apr 2011 09:36

problem is elsewhere

It seems to me that the problem isn't Co B but Co A and stock it holds for Co B, am i right?

If so, and the issue is what stock is physically still on the shelves of Co A warehouse but allocated to a Co B sale but not sold yet to B, nor despatched on behalf of Co B then it's not foremost an accounting issue but a stock management one.

Surely stock allocated to future orders is an issue for your Co A whether or not the customer is a 3rd party or inter co. If you have solved this problem for 3rd party customers then Co B shouldn't be any different. Then when despatched simply Cr Stock Dr COS, Cr Sales Dr InterCo Debtor in Co A. Co B posts Dr Purchases Cr Inter Co Creditor, Cr Sales Dr 3rd party Debtor.

Still don't need to account for stock in Co B and until it's despatched and sold by Co A it's all their stock. 

If I'm wrong then of course I'm wrong.

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