We are wishing to generate purchase invoices - mainly to use as a remittance advice, to show items sold and hence ‘purchased’ but also to show our commission charge for the sale. So that goods sold and itemised on the generated purchase invoice (remittance advice) totalling say £500, we will also show our commission (£50) to be credited to an account on the income side of the P&L account.
Purchase invoice Category codes appear to ‘resist’ codes which go to the income side of the P&L account. Is there any way around this please?
You can’t use purcahase invoices for sales. It just won’t work. And you will royally screw up the p and l and have massive tax implications.
You must know this being a chartered accountant?
Perhaps you didn’t explain yourself well.
I’m guessing what you mean is, you sale items on behalf of others and add a commission to it, which forms part of your sales?
Remittance advice or self billing invoice? Unclear.
I wouldn’t use the purchase invoice section to show your client what you have sold, unless of course you actually purchase the items before sale which you charge a commission for. Again its unclear.
Remember, depending on how you operate, using the wrong method will mess up your p and l.
It is not a case of using a purchase invoice to record sales. Essentially there are two sets of transactions going on with this type of ‘auction’ or private sale.
The sales side is easy. A buyer bids and purchases for items which can come from a mix of ‘sellers’ We invoice the Buyer as a normal sale, and the credit goes to an auction control account (since it is money that we will eventially have to hand over.
Then to each of the people whose goods have been sold, we raise a ‘purchase invoice’ which is more accurately a remittance advice. This shows all of the items of theirs that have been sold, and how much for. The sum of these is debited to the auction control account as we have now created the actual creditors who are owed for the goods sold - but not quite. There is our commission, which is a deduction from the amount we pay the suppliers of the goods sold. This needs to be on the remittance advice (purchase invoice) as a negative amount reducing the amount we are to pay the supplier and crediting our commission earned account.
The end effect is that those buying at the auction get a complete list of what they purchased and for how much
The sellers at the auction each get a complete list of the items of theirs that were sold, how much for and showing the deduction for our charges.
A ‘kludge’ to get around this would be to create a commission account in the ‘purchases’ section in the P&L account and then post a journal to get it to the proper location. I would much rather that this kludge was not needed. Quickfile does provide a means for Sales invoices to access all part of the chart of accounts, it would seem logical the Purchase invoices should be able to do the same
These types of sales are not the main activity of the club, which is a special interest membership organisation.
I don’t think qf allows access to all the chart of accounts from the purchase invoice though sadly.
And raising purchase invoices to use a remittance is going to include those purchases in the P and L which I’m assuming you don’t want, since your just the *agent" selling on behalf of the client and holding the funds until they are passed over, less commission.
The only way I can think of doing it would be a bodge of sorts. Others can advise if they agree or not.
But essentially raise an invoice for a sold item plus the commission. Which you treat as the remittance. Pay it down when it’s been sold.
Then when the client is paid mark it as a credit note refund against the invoice which leaves you with just the commission part of the invoice still showing under turnover.
This avoids using any purchase invoices or messing up the p and l.
That’s assuming that the commission is included in the sale price. If it is charged after than youd need to raise an invoice just for the item sold and a seperate invoice for the commission.
You may even need to mark all payments in and out as on Account depending on how the funds need to be split.
What you wouldn’t be able to do though is split one payment over multiple customer accounts unless you split the actual payments received in the bank account first.
Yes, that’s more or less it except that our commission is charged to the seller, and hence why it is shown on the remittance advice.
It’s easily kludged: I can always create a commission account in the purchases section of the P&L account and, before each set of accounts is prepared, journal the balance on the account to the commission account in the income section of the P&L
Cheers for the comments though, they help me to ‘think it through’ and sanity check my thinking.