I thought if I write it down it might make sense and wouldn't mind some reassurance as to whether I am on the right track
I am struggling a little on how how to show the following....
My client runs 2 businesses lets say A & B
I have just started entering purchase invoices on to sage and was just looking to see how they have beenn paid for
Business A has a current account and a credit card. Some of the invoices expenses are paid for by the credit card in which Business B pays the monthly balance owing on the credit card. Money is transferred (not necessarily to cover the balance owing) back from A to B.
I would set up the Current account as usual, and the credit card. Do I treat Business B as another creditor posting the payments made from the creditor account and then pay the creditor from A's current account?
Credit card *balance* payment is an intercompany loan from B to A, so I would post a receipt in companies A books to the loan account with company B -
dr credit card cr loan a/c
Being amount paid off credit card by company B
Payments from A to B, reduce the loan and will be a cash book payment to the loan account used above.
If they're not ltd companies. Credit card payment in business a = capital introduced
Same value is drawings from business B
I appreciate the above will net-off when the accounts are prepared but it gives you traceability.
Assuming: that A's only paying it's own suppliers and not some of B's. If this is the case then each time A uses the credit card on behalf of B, I'd post a payment to the loan account in A's books.
-- Edited by ADAS on Saturday 23rd of October 2010 04:24:01 PM
-- Edited by ADAS on Saturday 23rd of October 2010 04:25:58 PM
__________________
Tony
Responses are intended as outline only. Formal advice should be sort from your Institutes Technical Department or a suitably qualified Accountant.
I feel I might be over complicating things....and feeling thick!!
If A pays it's suppliers invoice with the credit card and B pays the balance on the credit card do I post the amount paid as capital introduced? The thing that confuses me is that if I do the above the balance on the credit card is never reduced
Company A would be paid by capital introduced to pay the bills which you could class as capital in the balance sheet or as a capital grant in the revenue in the p+L. Company B would show as a loan (in the debtors control) to company A, this would however need paying to company B at some point as it is a current/long term asset to company B and a current/long term liability to company A.
Which ever way it pans out you decrease the value of company A and increase the value of company B until it's sorted.
My opinion could however be wrong, it normally is.
If A pays it's suppliers invoice with the credit card and B pays the balance on the credit card do I post the amount paid as capital introduced? The thing that confuses me is that if I do the above the balance on the credit card is never reduced
Step One: A's Books
A pays its supplier invoice with Card
Dr Supplier Cr Credit card
B loans money to A to pay Credit card
Dr Credit Card Cr Capital introduced.
Step two: B Books
B loans money to A to pay credit card.
Dr Drawings Cr Bank
But because you've told us both businesses are owned by the same sole trader, the easiest way would be to have one set of books and use nominal analysis to report each "business" seperately. There's really only one economic entity (the sole trader) but they happen to have two sources of income.
hth.
-- Edited by ADAS on Saturday 23rd of October 2010 06:32:11 PM
__________________
Tony
Responses are intended as outline only. Formal advice should be sort from your Institutes Technical Department or a suitably qualified Accountant.
