I have a EUR invoice from a supplier that has been paid in full from the business GBP account (let’s say £70) but which overlaps with a period before incorporation of the company (let’s say half of it was pre-incorporation).
What’s the best way of accounting for this in QuickFile? I have a feeling that it should involve posting an adjustment to move a pro-rata amount to the Director’s Loan account, but am not sure of the proper way to do this. The bank entry has already been tagged as payment of the supplier invoice.
I’m thinking that a journal entry along the following lines would work (from the relevant nominal ledger account to the director’s loan account), but I’m not sure whether this has the correct effect on the PL:
The monthly supplier invoices each covers usage for the month just gone. So if the company was incorporated on 31 Dec and the invoice is issued on 15 Jan (and paid from the business account) then half of the usage is attributable to the company and the other half was before it existed.
Thinking further ahead, what about the invoice that is issued on 15 Jan next year? Similar issue: although paid in the next year, half of the cost should be attributed to this year. Or, for simplicity, is it OK just to treat the cost as being incurred on the date of invoice, particularly if it’s a fairly regular amount?
There’s a few things going on here which will Prob need to be cleared up before I would give an answer as to what to do.
Firstly you say the invoice dated January was for services prior to the invoice date. And some of it was prior to incorporation. I need to ask, who’s the invoice addressed to? You or the company? That matters because if its you, that’s an issue for claiming the expense at all.
Further ahead, yes if your being billed for services that relate to previous months then you should record the cost at the time the service is provided.
Ltd companies work on accrual basis not cash basis. You therefore need to record the cost at the time the service was provided (Dec) and recording the payment for those services in Jan.
But the service wasn’t provided at a single time point. It was provided continuously over the course of the billing period, from 15 Dec to 15 Jan (etc)… and I really mean continuously.
