Ok peeps, got a question! We sell new and second hand lawnmowers, I invoice the new lawnmowers out on sage as normal, no problem. They have started to take in trade-ins against the new lawnmowers so I'm not sure what way to enter these? Some scenarios that I have been faced with:
1. We sell new lawnmower for £2800 and trade in their second hand machine and give them £600 off their new mower. Do I give the £600 as a discount on their invoice? We then sell the second hand machine for £800 and I enter that as a sales invoice to new customer. Would that be correct??
2. We sell new lawnmower for £2800 the customer pays in full, the agreement is that we will sell their old machine on their behalf for a selling fee of £150, so we sell their machine to a new customer for £750, and we then need to give the customer his £600. What way to I enter this, as I don't have a purchase invoice to start with?!
1. Issue sales invoice for £2800 as per normal. Allocate the £2200 receipt against this. Leave £600 balance. Issue internal credit note for £600 (posted to same nominal code) to clear the account. Post journal as follows:
debit purchases £600 (as you have purchase the old lawnmower for this amount)
credit sales £600 (which puts right the fact you had reduced sales with the credit note)
2. I think you would need to issue some kind of paperwork that could be used as a purchase invoice and get the customer to sign it. Seems a bit messy though!
Hi Janine
You referred to car sales, I have one who sells second hand goods so your scenario is like the VAT margin scheme, although lawnmowers Im sure arent covered by this. However - I would suggest you look that up via the HMRC site, as the way to keep the records side of it has some good advice, as does Rob (thats twice Ive complimented today so I must stop!).
Re his point number two - I would absolutely document it with some kind of purchase invoice to keep the VAT man happy in the event of an inspection....you could actually get some specially printed invoice books that allow you to show any part exchanges.
__________________
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
Thanks Rob and Joanne, yes it is messy!! Nothing seems to be straightforward in this place, lol! I'll have a read through HMRC site for details about the VAT margin scheme, I'm getting stuck with that as some of the customers are VAT registered and others aren't so that is confusing the issues as well! Oh to have straightforward accounts :s
