How to account for goods / services that are for my other company

How to account for goods / services that are...

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Hi,

I have 2 small VAT registered companies. Company A and company B.

Occasionally I purchase services / goods for both companies at the same time so I get a better discount.

So a very simple example is an advertising banner.

I purchased 2 banners, 1 for company A and 1 for company B, but company A paid for both banners so that I got a discount.

I now want company B to pay company A for 1 banner but I am not sure how to account for this. I guess I should raise a VAT invoice, but what would be the double entry? It is not really sales.

When I raise the invoice, would the correct double entry be to credit Advertising expense account (Where the P/L invoice went), and debit debtors? I do not think I should be crediting the sales account.

Any help on how to correctly account for this would be great :-)

Thanks

Replies (4)

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By johngroganjga
28th Jun 2013 15:54

Yes you credit the expense account not sales.

In the other company the entry is of course a mirror image.

Thanks (1)
By petersaxton
28th Jun 2013 17:02

Raise a sales invoice with VAT

"now want company B to pay company A for 1 banner"

If the companies are not in one VAT group - 

Company A:

Dr Company B

Cr Expense

Cr VAT

Company B:

Dr Expenses

Dr VAT

Cr Company A

Then Company B pays Company A

 

 

Thanks (1)
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By The Black Knight
11th Jul 2013 12:18

I agree with Peter

raise a sales invoice and account for the Vat correctly.

Thanks (0)
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By Matt42
11th Jul 2013 12:30

I don't think company A should be raising a VAT invice to company B as it qualifies as a disbursment? Surely it's just an intercompany account settlement?

Thanks (0)