I use sage 50 and have just created a second company of the software its been a long time since I have dealt with intercompany transaction and it shows and im having a mental block.
Company A has been paying for items for company B but the invoices have been made out to Company A, i need to post them onto companies A sage but do I post them direct to nominal 2xxx or to the expense account and then credit them off to 2xxx
From memory I then raise a sales invoice to company B and again do I post this to 4xxx and then credit 2xxx.
I key as follows:-
Company A's payments - as Bank payments direct to inter co nominal 2xxx (which I set as a floating account cos often Ive got them going the other way as well!)
Company B - key as suppliers, process from eg an adjustments Bank as supplier payments in usual way. Clear adjustments Bank by transferring from their floating nominal 2xxx.
So then the correct invoices are in the correct company regardless of where they are paid from.
Not saying this is correct but the couple of Accountants who Ive done this for are happy with it! Someone else might suggest a better way!
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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
think that we need more detail to confirm the exact situation.
inter company trade within a group is completely legitimate business practice where the entities are run as seperate businesses, cost, profit or investment centres. However internally generated profits are false ones so the accounts need to be able to eradicate internal trade and false profit from the group accounts.
the questions that need to be asked here are...
is there any legitimate business reason for company A to purchase these goods?
is the sale to company B at cost or profit?
is company B paying more for the goods than it would if purchased external to the group?
is this officially a group of companies or being treated completely seperately?
is this to increase the turnover of the seperate accounts of company A to make its financial position seem better than it is? (Window Dressing)
If so is this in order to attract finance for the business (Fraud)
Or manipulate tax laibilities (Fraud)
You need to know the intent and rational behind the action before being compliant with it or you become part of it.
kind regards,
Shaun.
p.s. if this inter company trade does end up as a psuedo sale then the 4xxx code used needs to be a stand alone code as the accountant will need to seperately identify them to apply adjustments annuling any benefit that the business owner / director may believe that they are creating.
p.s.2 to me this seems more of a loan arrangement from company A to company B than the trading scenario described.
p.s.3. I do not use Sage software so for software specific advice please refer to the posts of others.
p.s.4. Are you able to talk to the companies accountant about how they want you to process this or will that end up with you being fired for bringing this to their attention?
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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.
Thanks for your reply Joanne but my MD wants the invoces in company A for some reason.
Hi
Thats quite often the problem we come up against, I get it all the time. Someone who maybe doesnt understand the Accounting procedures that need to be followed. Shaun is quite correct in saying that more information is required. Maybe try to find out what the MD is wanting to achieve with their response and seeing if he/she is ok with you contacting the Accountant on the basis you want to ensure you get it right and dont cause an issue for them further down the line.
__________________
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
