I have a client who hires machinery and if they they hire to a non credit customer then they take a £500 deposit by credit card which is then refunded when the machinery is returned.
My question is how do I account for this as the deposit is refunded but it could be days or months later and sometimes is over the end of a month. The client is VAT registered on the standard accounting scheme so no VAT is applicable until the machinery is returned and an invoice is raised on Sage.
I have a bank account set up for the payments received by credit card but I'm not sure where to pay the deposit amounts to.
The deposits are a liability, Treat the same as you would a loan.
The deposits should not go anywhere near revenue as they would skew the figures for the year.
For the double entry it would be bank and Creditors, amounts falling due within one year. (so reflected as cash and an equal and opposit liability).
For returnable deposits, even where the deposit is kept because the goods are either not returned or returned damaged then no tax point is created so no VAT is charged on the deposit (exempt, not zero rated).
Note that Forfeiture deposits are treated differently but we are talking about a returnable deposit here.
I don't use Sage but its a standard scenario so it should be able to handle it. Sure someone else will be along imminently with the nominal code entries.
All the best,
Shaun.
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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.
