I am in the process of trying to make the accounts reflect the actual amount of CIS which has been deducted from invoices and I'm having a 'senior moment' regarding the journal. At present invoices are put into Quickbooks at 100% of their value, but CIS will be deducted when they are paid. I thought this journal would do it: Dr Income Cr Taxes & CIS (P&L). Is this the correct way to remove the value of CIS from the invoices? I would be extremely grateful if somebody can set me straight. Equally, is there a better way of handling CIS?
Hi Lee
We always ask newbies to do a short intro - where based/bookkeeper or Accountant/how long/which prof body/are you studying and if so what or what exams/qualifications do you have, that sort of thing. Helps us get to know you and pitch the answers.
Also - what type of Quickbooks do you use - online or desktop (and what year/version)? Plus what software do you use for reporting the CIS?
Plus - Im assuming you are the contractor receiving invoices from subbies?
If you do a journal - will that clear the portion from the ledger control account? (sorry, more Qs back at you, last one...playing a bit devils advocate there!).
Welcome to the forum
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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
thank you for your reply, and please forgive me not introducing myself! I am based in Gloucestershire and I am a self employed bookkeeper who also does ad-hoc things like tax returns for small businesses and individuals. I studied AAT many years ago and for the most part I can find the answers to any queries I have by just googling about. I'm a little embarrassed I have come unstuck over such a simple thing.
As for QB- I use a desktop version, just for one client. They were doing little more than accumulating expenses for the best part of a year, but now the invoices have started going out. So here is what I'm doing:
I invoice for, say £1000, of which £100 is labour, and therefore the client of my customer (The Council) is obliged to deduct the CIS of £20 on the labour element of £100. So essentially when my client is paid he gets £980, and HMRC get the £20 when the council do their CIS return. I see £980 coming into the bank, which I allocate to the payment, leaving a balance of £20.... Which is correct due to the CIS deduction. What I am trying to do is 'get rid of' (properly account for) the £20 left on my client's debtors ledger, hence the journal I mention above. Unfortunately when I do the journal I get the credit going to the p&l, which may be correct, but I'm just not sure.
Thank you for taking the time to reply- it is nice to virtually meet you!
Hi again Lee.
I don't use QuickBooks myself, I'm a sage user, so the process might differ slightly, but here is what I would do. Raise a credit note for the CIS of £20 but instead of allocating this to the sales account, re-code it to a balance sheet account called CIS (debtor).
That removes the amount from the sales ledger control account, leaving the customer account at nil, but still showing the amount due back from HMRC idc.that can be cleared to drawings as required once the final tax position is known.
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
Thank you both very much. I shall treat it in the way you have discussed. This will then leave me with a growing balance on the new balance sheet accounts which, if I am understanding you correctly, will reduce the amount of drawings at the end of the year? Obviously I will need to clear this new balance sheet account so it is zero at the start of the new year, so I am assuming a journal between drawings and the new CIS balance sheet account at the end of the year is correct? Please correct me if I have missed something.
Hi Lee
For a sole trader, just journal it out to drawings (its just a good way to check where everything is up to just at year end, rather than dumping it all to drawings as you go). As John says, its a bit different for a Ltd.
__________________
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
