Back towards the end of Jan this year I opened a thread looking for help on the double-entry steps on some ‘non-standard’ sales I was getting involved in. Combining suggestions from one or two contributors (in particular Paul Courtier from his first post), I managed to sort it in my books.
However, there is now a further complication to sort out! Let me quickly set out a hypothetical situation to explain:
Total invoice payable by landlord is £500. My business receives £400 of this (i.e. 80%), which is paid into my business account. My business actually sub-contracts this work out and the contractor/supplier submits their invoice for £360. I pay this supplier the £360 and retain £40.
I am ok up to the point where my business receives the £400. After that I believe I will need to raise a purchase order on the sub-contractor (so that’s Dr purchases, Cr supplier). Then pay the supplier (Dr supplier, Cr bank). How do I handle the remaining £40? Also, as it stands, I have to raise an invoice for the £500 at the outset. In reality, I can’t show a sale of £500 in my books as I didn’t do the work - can I? Is the £40 just recorded as profit for my business? Thank you
Some questions on your hypothetical situation.
Total invoice payable by landlord is £500
My business receives £400 of this (i.e. 80%), which is paid into my business account.
Is the Landlord set up as a customer?
Sales Invoice for £500?
£400 Goes into you bank account
Why is £500 payable but they only pay you £400?
Is the £360/£40 related to CIS?
Do you produce a CIS return?
I invoice the estate agency for the £500, so it’s the agency who is set up as a customer. When they receive my invoice, they create a pdf copy of it and send it to the landlord. Subject to checking a few things internally, the estate agency pay me my entitlement of £400. The agency send me a remittance advice to reflect this. The £100 difference is handled via a debit entry using nominal 6100 (sales commissions)
I am not involved in CIS type work.
I will raise a purchase order on my sub-contractor/supplier for the £360. I assume this will be coded to nominal 5000 (general sales/cost of sales)?
Ok, thanks for that,
You would have the customer set up in customers. and you would raise the sales invoice for £500 as your customer is being charged £500.
I believe you should have the estate agent set up as a holding account in the banking screen.
In this account you would enter 3 transactions
£500 would be entered as a Money In transaction, tagged to pay off the invoice on the customer account
£100 would be entered as a Money Out transaction, tagged to pay off a purchase invoice to the agent
£400 would be entered as a Money Out transaction, tagged as a transfer to your bank
I will raise a purchase order on my sub-contractor/supplier for the £360.
With the sub contractor, this would just be a normal transaction Purchase order/Invoice and Pay them when it is due.
This is how I would record it but just to point out, I am not a registered accountant nor bookkeeper so it may be worth checking with yours to be sure
I think you are on very dodgy ground. You are providing the estate agent with an invoice for £500 (which they can then charge to the landlord) but you are only actually gwtting paid £400. That allows the estate agent to retain £100 commission which is not being disclosed to the landlord.
There is a ton of legislation on this and you are in a minefield. If the agent is treating it as a disbursement, they MUST pass the cost they are charged onto the client and not inflate it.
If they are providing the service, subcontracted to you who then subcontracts again, you would only be charging them £400 and they would have to charge VAT on top because they are most likely vat rated even if you are not
This topic was automatically closed 14 days after the last reply. New replies are no longer allowed.