Invoicing in group structures

Invoicing in group structures

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Hello folks,

As a lowly bookkeeper I'm not entirely sure of how to handle this one - I was hoping an accountant could give me the right answer before I hand the files to our accountant at year end!

Company X is a fully owned subsidiary of company Y. X has raised an invoice with a customer, and the customer has paid Y directly. Issuing a refund to the customer and requesting that they make payment to X isn't straightforward in this instance.

How should the payment be treated in both X and Y's ledgers?

Very many thanks in advance,

Jim

Replies (4)

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paddle steamer
By DJKL
12th Dec 2014 20:38

Contra in Y to clear

Y allocates bank received to contra, then makes payment to X also to contra, this clears transaction in books of Y

 

X receives from Y and treats as if from customer, as normal

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By johngroganjga
12th Dec 2014 21:06

The above is one way, but it involves an unnecessary movement of cash.

The more elegant way, by pure book-keeping, is that Y credits the cash received from X's customer to its inter-company account with X, and X then debits its inter-company account with Y and credits the customer's sales ledger account.

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Replying to DJKL:
paddle steamer
By DJKL
12th Dec 2014 22:16

May not be unnecessary

johngroganjga wrote:
The above is one way, but it involves an unnecessary movement of cash. The more elegant way, by pure book-keeping, is that Y credits the cash received from X's customer to its inter-company account with X, and X then debits its inter-company account with Y and credits the customer's sales ledger account.

Not unnecessary if X needs the funds.

Appreciate your approach may be more elegant, albeit beauty is in the eye of the beholder.

I tend to day to day manage our group on a cashflow basis, rather than a profit measurement basis; I like to view each entity's cashflow generation every quarter and I suspect that this impacted on my advice, which was possibly more agricultural than your solution.

I get a lot of these sorts of adjustments and find switching the funds online the simplest way to correct, switching the funds as part of the daily review of the bank account transactions makes the admin mainly seamless.

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By jim001
12th Dec 2014 21:35

Folks, thank you very much for the super quick answers. Either will solve the problem just fine for us... thanks!!!

Jim

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