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Accounting for disbursements

where does income for disbursements go in p&l

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I have a client who provides property maintenance. He invoices for his labour but also for materials used in his specific jobs eg nails, door hinges etc. I believe these would be categorised as disbursements and not included in his sales turnover. When it comes to his accouts where do I put this income as it isn’t technically a sale? Should there be a separate income line in the p&l or do I net the amount received off in cost of goods/direct materials?

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By Duggimon
09th Jul 2019 10:50

michjimblack wrote:

I believe these would be categorised as disbursements and not included in his sales turnover.

What leads you to this conclusion, instead of the generally accepted treatment of such items as materials, given that they are supplied to and used by your client?

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Replying to Duggimon:
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By michjimblack
09th Jul 2019 11:10

I have read up on it but I may be wrong. He does not make profit on these items, he itemises them in his invoice and they are solely used for the job he is carrying.

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Replying to michjimblack:
By Duggimon
09th Jul 2019 11:20

How much he charges his customers is irrelevant, it's all about who supplies who and I would argue that the hardware shop supplies your client and your client supplies his customers.

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By pauld
09th Jul 2019 11:01

If you do not want to include the sales of materials as income and therefore perhaps staying below the VAT threshold, your client should ask his customers to pay the supplier direct for their cost. Obviously this is not always practical but could be done for some jobs. It is unusual for builders etc to pass on the actual costs only of materials to customers, they usually add a percentage to increase their income/profits.

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By michjimblack
09th Jul 2019 11:15

He mainly looks after people’s second homes eg mowing lawns, cleaning but occasionally needs to make repairs so he doesn’t make up the materials he uses. I am guessing now then that these need to be included in turnover as the client doesn’t pay directly for them?

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Replying to michjimblack:
RLI
By lionofludesch
09th Jul 2019 11:22

michjimblack wrote:

He mainly looks after people’s second homes eg mowing lawns, cleaning but occasionally needs to make repairs so he doesn’t make up the materials he uses. I am guessing now then that these need to be included in turnover as the client doesn’t pay directly for them?

Who supplies what to whom ?

It's the key to everything.

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RLI
By lionofludesch
09th Jul 2019 11:13

"I believe these would be categorised as disbursements and not included in his sales turnover. "

I think you're probably kidding yourself.

Does he buy the sixteen screws he needs for a job on a separate invoice, addressed to the customer?

Or does he just buy a box of 500 in his own name and use sixteen of them on the job?

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By tom123
09th Jul 2019 11:17

Sounds like cost of sales to me

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By pauld
09th Jul 2019 11:24

Not sure what the issue is? include as income and deduct cost of materials purchased. This is much easier than trying to match materials on sales invoice with the cost on purchase invoice so that they cancel each other out.

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By lionofludesch
09th Jul 2019 11:36

The VAT registration threshold ?

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By Accountant A
09th Jul 2019 12:14

lionofludesch wrote:

The VAT registration threshold ?

Must charge a lot if "He mainly looks after people’s second homes eg mowing lawns, cleaning but occasionally needs to make repairs"!!!

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