A very simple company recharge

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Owner has a company credit card which is used for a mixture of personal expense and company expense. 

 

Previously the personal element would go to his directors loan account, however we want to stop that (various current reasons), and so it has been decided his other company will cover his personal expense. 

Scenario m

Statement comes in, journal as follows 

Dr expense nominals P&L (company exp)

Cr supplier 

Dr other company recharge debtors a/c (personal exp)

Cr supplier 

 

when paid the supplier will be netted off against bank

 

Cash transferred from other company then journal as follows

dr bank

cr other company recharge account

 

any reason why we cannot do this?

 

 

Replies (5)

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By johngroganjga
06th Nov 2017 12:25

No - there is no reason why another company cannot bear the cost of his personal expenses, but whether that produces a better (more tax efficient) result for him is not obvious from the information you supply. How will the other company be accounting for the personal expenditure it bears?

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By WhichTyler
06th Nov 2017 13:31

Is the company VAT registered? If so you may need to think through the VAT treatment

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By ireallyshouldknowthisbut
06th Nov 2017 13:59

So long as the director doesn't think it magically make the expenses tax deductible, then no problem.
Ie they are booked against the loan account in the other company or treated as a BIK.

It might of course be neater to stop the idiot using the wrong card.

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By Maverickj8
07th Nov 2017 05:31

Thanks for comments.

There is no VAT involved. How it will be treated in the other company is either expense it or same treatment: borrowed against divi’s through DLA account.

I suspect the latter would be most appropriate.

Does the journal entry look ok for the recharging?

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Replying to Maverickj8:
By johngroganjga
07th Nov 2017 11:05

If you don’t understand the effect of any given journal entry you should pass the matter to the company’s accountant. Journal entries are a means to an end, not a subject of interest in themselves. The subject of interest here is whether the private expenses can be recharged to the other company.

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