My client is a micro entity whose main business is provision of services.
A supplier provided a good with a value of 150. The good was consumable, not inventory or a fixed asset.
Instead of cash payment, they asked for settlement with a free service worth 120.
If I make the following double entries: Dr Expenses 150, Cr Revenue 120 how should I account for the remaining 30?
Thanks!
Replies (3)
Please login or register to join the discussion.
How would you account for the entries if the supplier had paid cash for the service and your client had paid cash for the goods?
If you did what you suggested, you'd end up £30 overdrawn, but in reality you aren't.
Paul's answer below is correct.
Assuming that both supplier and client accept the deal is complete and no further amounts are due then either the supplier has given a £30 discount or your client has earned a premium of £30 (or I suppose a bit of both). I assume there is no VAT in question.