ok I have a really messy issue here and i think i have come up with a solution but want to know if my solutiion is the best option or if there is a better option.
the company i am doing accounts for buys goods from china. the company has had another company buy 50% of this company therefore for your info i will refer to the company i am working for as company 1 and the second company that bought into it as company 2 to keep it simple. anyway company 2 lent company 1 funds to pay the china supplier for goods due to cashflow issues but company 2 paid the china supplier direct and it has been agreed that the money they have lent the company will be repaid in goods as they also use the goods that company 1 is selling. please note that i am not doing the accounts for company 2 as they are entirely separate. the payment for the goods always is made before we receive the actual invoice from china.
so this is how i thought the best option of dealing with this!
do a journal between the loan account and prepayments.
when supplier invoice received post this purchase invoice to 5001 on the china supplier account
post a sales invoice to the customer account for the second company to 4000
post the vat for the import tax to the supplier account with a nil net figure and only vat entered
post a customer credit to the second company but post it to 2300 the loan account therefore reducing the loan liability
to clear the supplier invoices if i post a purchase credit note to 2300 it means that the amount wont show in the vat return which i need it to to balance the vat recliamed. therefore thought woud do a write off for the supplier invoices and then do a journal from the bad debt write off nominal to the loan account 2300
then reverse the journal for the prepayment and loan account.
by the way i am using sage. sorry this is long winded but want to check this is correct or maybe someone else knows off a better way to deal with it. also because the loan never hit company 1 bank account does this cause any implications when having an inspection etc?
Is the company paying the Vat to their clearing agent and will then receive a C79 from HMRC? Does the company prepare Management accounts or is it close to year end? Is the supplier account held in stg or foreign currency
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Tony
Responses are intended as outline only. Formal advice should be sort from your Institutes Technical Department or a suitably qualified Accountant.
Hi yes they pay the vat to the shipping agent and wait for the certificate from hmrc and yes it is in sterling and no not near year end but do management reports. Any ideas if I'm right on what I have done or is there a better way
Personally, I'd open a control account in the Balance Sheet, called C79 control. I'd post the Agents Vat invoice as a debit to this account and when the C79 is received post a journal
Dr Vat recoverable Cr C79 Control
That way you Vat reports are correct and you don't have to use bad debts as a contra. The Caveat in the above is that this is the way Vat will be handled with the Agent. I know there is a simplified scheme which I don't have any experience of this.
Personally, I wouldn't bother with prepayments. I would post a credit note from the Supplier account to Company 2 loan account and then the sales invoice as you suggested.
Naturally this will leave a Debit on the Supplier account but it's not "really" going to affect the management accounts to a material level, but others may disagree with that. The "problem" I could see with using prepayments is if there's multiple deposits with multiple supplier, it could be difficult to keep track of. But you would have to change this at year end.
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Tony
Responses are intended as outline only. Formal advice should be sort from your Institutes Technical Department or a suitably qualified Accountant.
thanks for getting back to me. I only thought about using the prepayment as most times the payments are made before the china invoice is received and plus i thought that maybe it might be better showing exactly what is a prepayment as it can up to two months before the goods arrive in the uk.
i also realised that when i post the supplier credit to the supplier account but to nominal 2300 if i post it as t9 instead of t0 then it wont affect the vat return, which then puts it all straight.
thanks for your help but these imports and exports are so confusing but i have to say i love this forum as there is so much help available.
