I currently look after a kitchen company who take 50% deposits, then balance on completion. A contract for the full amount is signed by the customer at the outset. I usually do a PI in Sage for the deposit, but wait until the balance is paid before I do a PI for the balance.
I'm just wondering how to play it when the year end is imminent. Do I put the balance monies down as 'accrued income' in the balance sheet and then reduce it as actual monies are received? How do I actually process this is Sage? Would I account for VAT as the balances are paid or when I accrue the income?
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
I used to work for a furniture company in the same situation. We used to enter the deposit on the sales ledger account, and only invoice when the goods were actually delivered, as this is when the sale took place.
We had to pay the vat over on any credit sales ledger balances at the end of the vat quarter.
At year end, any credit sales ledger account balances were transferred to other creditors on the accounts software, Sage was left as it was.
Hi Chris
I was just thinking the same and arent we both mad for being cooped up in an office on such a great day!
I just realised that I put PI instead of SI - shoot me now!
So are you saying you just used to put the deposit in as a Payment on Account?
My thinking was - as soon as the contract is signed I raise an invoice in Sage for 50% and then link the deposit monies to that invoice, so nothing shows in debtors for more than a couple of days and the VAT man gets his VAT on the half that is paid.
Then I go through the same process for the completion monies (the other 50%) - some of these might then fall into the next VAT period (which the VAT man on an early inspection was ok with).
But at year end I think they should show in the accounts - I guess the question is also - do I show the balance on ALL contracts or only those where work has started?
Sorry Chris but I need to ensure this is very clear in my mind.
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
The problem is with raising an invoice upon deposit is that you could be showing a sale before your company has even ordered any goods
The vat will be ok, as long as you pay the vat included within any credit customer accounts, any other vat due will have been picked up on the sales invoices
In respect of the accounts, this is where stock would come imto play. Say you have took a deposit of £1000 plus vat, and ordered goods of £500 plus vat, but they havent been delivered. You wouldnt have issued an invoice, but you would have £500 in stock, so this would show on the balance sheet, reducing the purchases by £500, so in effect, there is no entries on the P&L.
