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P&L entry for rechargeable expenses?

We charge our clients for our travel & subsistence. Do I then deduct this figure from Gross Profit?

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We charge our clients for our employee's travel, hotel costs, etc. In the P&L, I enter under gross profit the total sales invoice amount (incl. VAT), then deduct Flat Rate VAT and finally deduct the expenses charged to the clients. Resulting in a Gross Profit figure. Is this accounting entries correct?

 

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By JDBENJAMIN
13th Nov 2019 13:48

Ask your accountant, not us.

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Replying to JDBENJAMIN:
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By Fonseca
13th Nov 2019 14:06

We are a very small company (2 employees) and we don't have an accountant. We were hoping someone in the community may be able to answer the question

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Replying to Fonseca:
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By JoF
13th Nov 2019 14:43

I look after small companies with only shareholder/director and no staff but they have an Accountant, ie me.

What is the real reason you have no Accountant?

You do realise that Aweb (in their words) is the largest independent online community for accounting professionals, providing award-winning content and online engagement ...

Key words being for accounting professionals.

Why on earth would you think it is ok to not pay an Accountant, but then expect the very same Accountants to provide you with information for free?

All the exam taking and training really are just not worth it because we have to deal with people like you who dont really give a damn that some on here have sweated blood and tears and spent LOTS of money to get the knowledge we have! Think I will go and be a bin lady - get more bloody respect that way and not asked to do sh*t for free!

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Replying to JoF:
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By Fonseca
13th Nov 2019 15:00

Wow! I had no idea this was a professional site only. The website is accountingweb and the category I chose was bookkeeping. I am a bookkeeper acting in an accountants role so as to keep costs down. Sorry if I have caused offence by asking for help.

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Replying to Fonseca:
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By JDBENJAMIN
13th Nov 2019 15:02

Who prepares your annual accounts and Corporation Tax return? See, you have got an accountant.

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Hallerud at Easter
By DJKL
13th Nov 2019 14:04

Its is hardly a gross profit figure, more a net fees.

I have been known to allocate rebilled travel as a CR to travel costs rather than leaving in fees but be aware that if HMRC do a vat visit they will get very confused as the accounts will be out of kilter with the vat returns submitted.

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Replying to DJKL:
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By Fonseca
13th Nov 2019 14:42

I charge VAT on travel/hotel expenses recharged to our clients - which I believe is correct. If I did your proposed entry my travel/hotel costs would be a credit figure, which would look odd for expenses and may be awkward when filling out our companies house return?

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Replying to Fonseca:
Hallerud at Easter
By DJKL
13th Nov 2019 14:48

Sorry, you said you are deducting the amount rebilled re travel etc from gross sales in your original post, so Debit sales, where are you posting the credit?

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Replying to Fonseca:
RLI
By lionofludesch
13th Nov 2019 15:00

Fonseca wrote:

I charge VAT on travel/hotel expenses recharged to our clients - which I believe is correct. If I did your proposed entry my travel/hotel costs would be a credit figure, which would look odd for expenses and may be awkward when filling out our companies house return?

Why would you be showing your expenses recharged on your Companies House Return ? You only need a Balance Sheet. You claim that you're a Very Small Company.

I'm not clear on exactly what these services are - but it's likely that the travel and hotel costs are part of your charges for your services so they should be treated as sales.

I don't agree that the credit for the Flat Rate surplus should be about the Gross Profit line. It's Other Income for me.

Get an accountant before things go badly wrong.

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By paul.benny
13th Nov 2019 14:07

There is guidance on the HMRC website for use of the VAT flat rate scheme. Start by searching for VAT700.

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By JCresswellTax
13th Nov 2019 14:11

Aw come on guys, they are just a small firm that dont want to pay accountancy fees, surely we can help?

Personally, I can't but come on.

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RLI
By lionofludesch
13th Nov 2019 14:38

You enter your sales under Gross Profit ?

Surely Sales is the top line ......

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Replying to lionofludesch:
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By Fonseca
13th Nov 2019 14:47

Sorry if I was misleading.
To calculate Gross profit :
Sales invoices cr
Flat rate VAT charge dr
Rechargeable expenses ( excl. VAT) dr
Total Gross profit

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Replying to Fonseca:
Hallerud at Easter
By DJKL
13th Nov 2019 14:48

So where does the credit go re the rechargeable expenses, Dr sales Cr what?

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Replying to DJKL:
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By Fonseca
13th Nov 2019 15:19

Cr Bank.

Many thanks for your replies. I hadn't realised this site was for accountants only as per a respondent. I will seek advice elsewhere.

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Replying to Fonseca:
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By JoF
13th Nov 2019 15:42

Please make that 'elsewhere' an Accountant rather than some other forum where you get people who have even less of a clue responding.

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Replying to Fonseca:
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By lesley.barnes
13th Nov 2019 14:56

Where are you showing the costs for the expenses that you are recharging the clients?

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Replying to Fonseca:
Hallerud at Easter
By DJKL
13th Nov 2019 15:05

Finally got what you are saying:

You are sales Gross inc rebilled travel costs on the invoicesCR
Flat rate vat charge DR
The cost to you of the travel (not the amount recharged to the customers included in the gross invoice) DR

I would really not call it a Gross Profit- where are staff wages, why does travel get included in the comp but not the more significant labour costs (if it is services you are selling)?

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Replying to DJKL:
RLI
By lionofludesch
13th Nov 2019 15:27

DJKL wrote:

You are sales Gross inc rebilled travel costs on the invoicesCR
Flat rate vat charge DR

Ah - right !!

So, if we've got a £100 bill + VAT, with a flat rate of 10%, say, you're saying turnover is

£100 + £20 VAT - £12 flat rate = £108.

I would say turnover is £100 and you have other income of £8.

But that's just me reading the FRSs instead of bumbling along.

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Replying to lionofludesch:
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By lionofludesch
13th Nov 2019 15:29

That Jon Dawson has put me in a reyt tetchy mood today.

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Replying to lionofludesch:
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By JoF
13th Nov 2019 15:48

Him and a few others.

I thought this profession was a respected one!

That said just had my faith in humanity repaired whilst ordering a celebration birthday cake.

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Replying to JoF:
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By lionofludesch
13th Nov 2019 15:52

JoF wrote:

That said just had my faith in humanity repaired whilst ordering a celebration birthday cake.

From Ashers ?

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Replying to lionofludesch:
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By JoF
13th Nov 2019 16:01

haha, no.

Tempted to use the Queens baker, but they didnt like the star wars/football/Michelin star foody theme for some reason!

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Replying to lionofludesch:
Hallerud at Easter
By DJKL
13th Nov 2019 15:35

It is not me agreeing or disagreeing with the OP it is me trying to follow what he was saying he was doing re his debits and credits. (No idea if a company anyway)

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Replying to DJKL:
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By lionofludesch
13th Nov 2019 15:47

DJKL wrote:

It is not me agreeing or disagreeing with the OP it is me trying to follow what he was saying he was doing re his debits and credits. (No idea if a company anyway)

Sure - I accept that.

The OP does mention Companies House returns in an earlier post.

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Replying to lionofludesch:
Hallerud at Easter
By DJKL
13th Nov 2019 15:54

I missed that detail, slipping.

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