Can you please let me know how to treat money temporarily held in a company bank account on behalf of other company. The reason for that was that the other company had some kind of a problem with their bank account (at least that was the director's explanation) Does the money need to go through P/L at all or it is a current liability only? The company is a charity.
Do you hear that... its the distant sound of money laundering (tax evasion) warning bells going off.
You need to understand the exact circumstances of the transaction to know how to treat it.
Best case scenario is that company A recognises the income then records a loan to the charity. The charity receieves the money without it ever touching the bank account of company A but it is still recorded by company A as received and then loaned.
The charity recognises a loan and then repays it.
You need to know that company A has recognised the income in the correct period (could be that the money is being held until after a period end to avaoid recognising it in the correct period to reduce tax liability (and that would come under Laundering)).
Do you also do the books for the company as well as the charity? If so checking that its been handled correctly should be relatively straight forwards (i.e. check that the invoice exists within the system and the date on it, check that it is recorded as receieved and the date of receipt, check that the loan to the charity is recorded).
HTH
__________________
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.
