Please could someone assist with how much revenue should be recognised in the below scenario. Two "seperate" transactions but relate to the same individual who appears as both a customer and a supplier
- As a supplier we wish to make a sale of a stock item to customer XYZ for £10,000 + VAT. Sales invoice will be generated for this amount
- At the same time we have agreed to purchase an item from them for £5,000 + VAT (as they are also VAT registered)
How do we account for such a transaction and how much revenue should be recognised in total assuming the sale meets all the criteria for revenue recognition?
Can we offset to a clearing account the Account Payable amount of £5000+VAT against the Accounts Receivable amount of £10,000+VAT which will create the following:-
Credit Memo on AP purchase invoice
Dr Accounts Payable 5000
Cr AR/AR Offset Clearing Account 5000
Credit Note on AR sales invoice
Dr AR/AR Offset Clearing Account 5000
Cr Accounts Receivable 5000
£5,000+VAT cash due from XYZ
£1,000 VAT due to HMRC
Would the item purchased sit in Inventory at £5,000 to then be sold at a later date?
Sorry for so many questions! Thanks in advance