I had to pay £1000 as a deposit to my supplier in order to get credit terms, how do I record this transaction, I've tried using the journal, but it does'nt seems to be the right way.
Not sure what software you're using - as the majority of queries on here relate to Sage, I would guess Sage, which would be a payment directly against your supplier - so you need to create the supplier account, then post the payment. There will be no invoice to allocate it against, so it will be a 'payment on account'.
Thank you everyone, yes, it works by payment on account, it should stay in the supplier account unless I allocate it and use it . but when I run the supplier statement report, it shows that the £1000 deposit (payment on account) is deducted against the out standing invoices, how can I just keep the deposit sitting in the suppler's account , untouched, and same on the statement too?
Because my supplier only wants to keep hold of the deposit as a guarantee in case I can't keep up the payment.
Hope I'm making any sense. Many thanks,
Rachel
-- Edited by RACHELC on Wednesday 9th of March 2011 01:14:06 AM
If the deposit is to be held long term you could treat it as a balance sheet item and post it as a payment to 'other debtors' or something similar (its like like a rent depost for example) this would keep your creditors ledger more accurate so it is not reduced by the deposit on account.
I suppose you could open a new creditor account and post the payment on account there. It would show as a debit balance until you received the deposit back (or transfer it to the main account later). But this would show your overall creditors ledger balance (control account) as reduced on the balance sheet.
Just a couple of suggestion, in all cases make sure you cross referene so you keep track of it. Hope this helps a little
If anyone can hepl me please. Im working for a company who are trading as events,they doing weddings and Im not sure how can I record transactions on sage accounts.
So we send an invoice to the customer from the totals amound let I say 4000 then the customer are paying 25% deposit in two weeks then second part payment just before the weddings date, so basicly we have got the money in advance and it shows we made money right now but actually this is next financial year income.
Money receieved in advance is a liability, not an asset.
Dr Bank Cr Liability account.
When the criteria are met that your side of the contract has been fulfilled then
Dr Liability account Cr Revenue account
The key is that you should not recognise the revenue until you have the right to receieve it.
kind regards,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Is the company registered for VAT ? - I used to have a client with a similar business and we had to account for VAT at the time the deposits were taken. This I believe this may be peculiar to event type companies.
I think you could use a nominal code in the current liabilities range and then transfer to a revenue account (sales?) at the time of the event when the final value is known.
As I recall - and this was a system I inherited and running on Sage 50 2008 - for a outside catering for "high end" weddings etc, in marquees, country houses and the like and therefore subject to standard rate vat.
At the time (please check current rules with HMRC) as such high deposits were taken sometimes a very long time in advance (two years or more) the deposit was considered gross of vat and so the vat element had to be declared and paid to HMRC.(this was standard Vat accounting and NOT cash accounting)
A 25% deposit was taken at the time of booking and a futher deposit to bring the total to 90% was taken approx 6 weeks prior to the event. The final amount (which could be more or less than 10% depending upon any last minute changes) was due after the event.
A customer account was opened and a sales vat invoice was raised for each of the deposits and coded to a balance sheet account (in this case 1104 was used and named 'customer deposits'). At the time of the event the net amount of the deposits were transferred by journal from 1104 to the sales code 4000 and the final sales invoice raised whcih was also coded to 4000. (this was a system recommended by the clients accountants)
It was of course a nightmare to keep track of the deposits, so I kept a spread sheet of the balances in 1104. Adding and taking out the values as required. This spreadheat reconciled back to the nominal account which could run to hundreds of thousands at any one time.
Some care should be taken in creating customer accounts - this client used surnames for the account number but you can imagine how many smiths & jones there were after a while. I wonder if using an account number based on the event date might have been better. But by using the sales ledger for the deposits at least you can trace back the activity on their account. Although the balance of the debors ledger is always very low (only final balances on there very briefly).
Sage ran along side a industry specific software which took care of the scheduling ans pricing of the events.
We did have a VAT inspection whilst I was there and this arrangement was confirmed at the time to be correct.
Well that's how it was done with this client - it was a very time consuming process and maybe someone else may have a better solution
I hope I have helped Sandra and good luck - I have typed this rather quickly this morning so hope there are not too may typos
This is a lot of information more than I ever thought very helpful. Thank you very much for your time and for your kind explanation.
Just one more think you are saying the deposits coded to 1104 and named to customer deposits ,what is Current Assets ( sage accounts starts with 1000 and thet are between 1000 and 1999) if Im right, so shouldnt code to Current Liabilities than?
Yes you are right - you would generally use a code within the current iabilities range. I inherited this chart of accounts, I think they just wanted the account to appear close to the debtors on the trial balance and the nominal ledger list.
