I'm new to the forum and bookkeeping in general! I only do my own books for my ltd company, so I'm not sure if I'm in the right forum?
The company is new and I have signed up to sage one accounting and payroll. My question relates to my insurance on the Trucks I operate (I'm a haulage company). The insurance is renewed annually and paid in installments through a finance company. The insurance attracts interest from the finance company and is paid over 10 months following an initial deposit to the insurance broker. I need to post the relevant entries into sage one, which journals do i need to set up?
To make things simple if I assume the insurance costs £10k per annum and I pay £1000 deposit with £9000 paid over 10 months to the finance company, total interest charged £500 so monthly payments are £905. Total cost will then be £10500.
If anyone can handhold me through the process I would be most appreciative, it will save me waiting until tomorrow to speak to my accountant.
I would post the £10,000 invoice under the prepayment account for insurance then move £833.33 per month to the insurance expense account through a journal. I'd post the £500 to Finance Charges prepayment and again move £41.66 per month to the Finance Charge expense account.
Each of your actual payments can then be paid to the supplier account.
It depends whether the accountant will do all the accruals and prepayments at the end of year though so it's best to ask them first.
Many Thanks Matthew, I have since my post spoken to my accountant, who suggests that I keep it simple and post the payments to the insurance expense account and let him handle the journal entries. I'll go with that at the moment, although I must admit I like to have a better handle on my accounts from a personal point of view, so I'll probably ask him to give me some additional guidance when I next meet with him.
Anyway, thanks once again, I appreciate you taking the time to help me.
Hi Steve
To keep it simple - set up the insurance company as a supplier - key the invoice for the insurance to that account and insurance nominal (ie cost) code - not sure what it is set up as in sage online as I only use professional version - something close to 710x. Key the difference between the insurance and what the finance company charging as a 'dummy invoice' to that same supplier, but using the 'charge for credit' nominal - set up a new one if required - again should be lurking around the 79xx area.
When your Direct debit payment goes through each month just allocate it to that supplier - you can match to the original invoice and then the dummy and the supplier account will be cleared within the 10 month period. That way the full cost for the insurance will be expensed as he suggests.
Then all the Accountant will need to do are the adjustment journals for prepayments - he may just do a figure to cover the year end given you are a newco. If you want monthly or quarterly management accounts I would get him to do it for you then either monthly or quarterly - or show you how.
HTH
__________________
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
