I have a client who has two companies. They have quite a few annual subscriptions for various governing bodies. Sometimes they will pay these subscriptions from one company, but need it apportioned to both companies - how do I journal this and account for monthly payments too.
For example
Payment made in Dec for Supscription for £576 paid through Company A's bank account
This needs to be apportioned 70% to company A and 30% to company B, plus needs to also be broken down monthly for the P&L
First question has to be why are there two compamies where both are dependant upon the same subscriptions?
There can be all manner of legitimate reasons for that business structure and also a good many not so legitimate ones.
So, question has to be is it legitimate (namely are the two businesses genuinely totally seperate from each other) or is this an attempt to perhaps avoid paying VAT? If so, if HMRC looks at them they will treat them as a single entity as though they had always been a single entity.
If genuinely seperate then I assume that this turns into a (I assume) Sage 50 how to question rather than the double entries required so I'll leave that to others to fill out the gaps. Just wanted you to have a think about the legitimacy of the request and indeed the organisation structure before considering the nuts and bolts of how to implement.
Bacially just follow the old rule of always consider whether you should before thinking about whether you could.
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.
It is legitimate. They are not VAT registered as they are a healthcare provider. The subscriptions are governing things for the owner rather than the businesses directly, and the ratios are worked out as to the time she spends at each premises, therefore she can claim these percentages per company, but as she gets one invoice she tends to just pay the invoice in full rather than two separate payments from each company, so we have to show in for the P&L and balance sheets as an intercompany transfer as such.
I already have account set up for when they do inter company transfers. I just wasn't sure how the journals would work. I've posted the invoices to Dues & subscriptions, and I need to do journals for the monthly breakdown, but didn't know how to incorporate the inter company proportion into the journals.
dr Subscriptions A/c £402.50, dr Company B currrent a/c (or however you designate this debtor) £172.50; cr Bank £575.00.
Company B
dr Subscriptions A/c £172.50; cr Company A current a/c £172.50
Then, if a settlement between Co A and Co B is to be made:
Company A
dr Bank £172.50; cr Company B curr a/c £172.50
Company B
dr Company A curr a/c £172.50; cr Bank £172.50
If you have any accruals and prepayments to deal with at period end, you can make appropriate provisions within each company's books without regard as to how the payment was actually effected.
You don't need to prepay the inter-company balance for this transaction - that's either due or settled. When you adjust for prepayments, all you need to do is dr Prepayments; cr Subscriptions in each company's accounts for their respective prepaid subscription amounts. (The prepaid amounts are "due" from the governing body concerned, not from Company B.)
