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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Yes you credit the expense account not sales.
In the other company the entry is of course a mirror image.
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
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?