I am a bit out of my depth once more and would appreciate the help.
So to start, my company bought a freehold property and turned it into 3 flats.
So I have the completion statements that list the sale price, plus some reimbursements, less solicitors expenses (these expenses I have already posted on sage as VAT will be claimed) and it ends with a balance that was paid to us.
So I have come up to this:
1) I raise the sales invoice
2) I raise a credit equal to the solicitors expenses and code it to suspense account
3) I process the amount received at bank and it all evens out.
But now I have a balance in the suspense account and also creditors outstanding equal to the solicitors expenses.
So can I now raise an invoice from the solicitors account and post it to the suspense account to even everything out? Would that work or is it wrong to do so?
One final thing, if we are having an engrossment fee reimbursed, is it correct to claim VAT from the initial invoice?
I secretly hope that you will say all is fine, but not very confident.
Right, so. I have set up the solicitors both as a supplier and customer. They raise invoices for all the services they provide us with (including the engrossment fees) and these are the documents I used to post the expenses. So VAT and creditors are debited.
Now the engrossment fee is covered by the buyers and the sum of the solicitors services is charged against the funds payable to us. It's tax point is the date of issue, it's stated on the invoice. So if the flat price was agreed to be A, engrossment fee covered by buyers is B and solicitors services is C, the amount we receive in Bank is A+B-C. All this is documented on the completion statement.
About the suspense account some people suggested similar solutions in similar problems. My thinking was not to use the suspense as a dumper, but as a "medium point", because as I would post the sales invoice in the customers accounts, the funds received would not be enough to cover the invoice by an amount equal to the expenses. So I would raise the dummy credit to match it with the expenses invoice and that would keep my balances as they should.
Right, so. I have set up the solicitors both as a supplier and customer. They raise invoices for all the services they provide us with (including the engrossment fees) and these are the documents I used to post the expenses. So VAT and creditors are debited.
Now the engrossment fee is covered by the buyers and the sum of the solicitors services is charged against the funds payable to us. It's tax point is the date of issue, it's stated on the invoice. So if the flat price was agreed to be A, engrossment fee covered by buyers is B and solicitors services is C, the amount we receive in Bank is A+B-C. All this is documented on the completion statement.
About the suspense account some people suggested similar solutions in similar problems. My thinking was not to use the suspense as a dumper, but as a "medium point", because as I would post the sales invoice in the customers accounts, the funds received would not be enough to cover the invoice by an amount equal to the expenses. So I would raise the dummy credit to match it with the expenses invoice and that would keep my balances as they should.
I'm sorry, where am I going wrong?
Hi Marios
Are you having a bad day chuck? Think you mean Vat and expenses debited, creditors credited.
Anyway - what I trying to get to was did you have an invoice from them and clearly you do. Although, think Im having a woolly brain day - should the engrossment fee (plus VAT) be included in YOUR invoice from them, given its the buyer who is paying it? (granted it should be in the completion statement). But are the solicitors getting two bites of the cherry and charging the buyer and charging you? Will ignore that one for here, leave you to sort that one and the resultant VAT issue on it.
Re the other, no idea what 'people' you've been talking to - could get very offended after our last exchange and I didnt even send the bill you promised to pay lol
So - first things first - do you have a 'contra' option on sage - some of the newer ones do, although so far Ive not used it (only cos Ive not needed to yet!)
If not - forget the suspense account, just do the following (if you wish to match the main Bank to your statement). Forget the sales invoice (unless you are issuing one).
Eg sales price £100000, plus engrossment £50, less sols fees = balance paid £99950.
Set up 'Adjustments (dummy) Bank' (useful for all sorts, including Director's spend if you wish). Transfer £99950 from Adjustments Bank TO main Bank
Key a Bank receipt to the adjustments Bank for £100050, code it to sales. Then key a Supplier Payment to the solicitors for £100.
Look at TB - sales/expenses shows correct figure and PLCA (sols /ac) is cleared. Adjustments Bank at nil. Total from completion statement showing in Bank as one amount which you can now rec. Job done. As ever try it in practice data if you feel the need.
__________________
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
About the engrossment invoice, it is a separate one and I haven't posted it yet as I wasn't sure about the VAT. It surely doesn't seem right to claim VAT and then get the full value back from the buyer. On that note, if the same engrossment fee is shown in the same completion statement both under reimbursements and solicitor expenses, can I ignore it altogether? Or I can I post it as normal with T1, and when I post the sales invoice I can add one extra line to the invoice and post it with a T1 against the expenses and even the VAT out. Or should I make all engrossment fee related posts with a T0?
When I say "people" I mean looking online. I don't want to raise a question without searching for an answer myself. Otherwise trust me I'd be asking you questions all day And it's not really fair to you.
Right what you say makes absolute sense and leaves all the balances where they should. Yes I will raise a sales invoice. Would that slightly change your suggestion?
So you seem to favour the Dummy bank account solution. So would it be safe to approach similar situations in the same way? From a good bookkeeping perspective, is it good practice. I am asking as a student, please don't get me wrong.
Forgot to mention, there's no Contra option on our version (v21). If there is one, I am not aware of it...
-- Edited by Marios on Thursday 20th of October 2016 03:20:34 PM
-- Edited by Marios on Thursday 20th of October 2016 03:25:45 PM
-- Edited by Marios on Thursday 20th of October 2016 04:24:57 PM
About the engrossment invoice, it is a separate one and I haven't posted it yet as I wasn't sure about the VAT. It surely doesn't seem right to claim VAT and then get the full value back from the buyer. On that note, if the same engrossment fee is shown in the same completion statement both under reimbursements and solicitor expenses, can I ignore it altogether? Or I can I post it as normal with T1, and when I post the sales invoice I can add one extra line to the invoice and post it with a T1 against the expenses and even the VAT out. Or should I make all engrossment fee related posts with a T0? Think I would first ring the sols and double check its the same thing/why they have invoiced you? Also - just to check are you actually going to be sending an invoice to your customer? Or is this just a dummy invoice to put it into sage?
When I say "people" I mean looking online. I don't want to raise a question without searching for an answer myself. Otherwise trust me I'd be asking you questions all day And it's not really fair to you.
Right what you say makes absolute sense and leaves all the balances where they should. Yes I will raise a sales invoice. Would that slightly change your suggestion? If you raise an invoice, instead of keying as a 'Bank receipt' you would just key as a 'customer receipt'
So you seem to favour the Dummy bank account solution. As ever there are more ways in sage. EG just run the two transactions through your main Bank, BUT if you do this I would annotate the Bank statement against the monies in to show sage reflects this as dr/cr and the amounts so the Accountant can follow it if needs be (or for you if you look back in a few months time). So would it be safe to approach similar situations in the same way? From a good bookkeeping perspective, is it good practice. I am asking as a student, please don't get me wrong.
Forgot to mention, there's no Contra option on our version (v21). If there is one, I am not aware of it... Ahhh, I might have some good news for you there - Ive checked V21 and they do indeed have a contra option, so now no need for the Adjustments bank (not for this instance though) nor the Bank statement annotation, but would require a dummy sales invoice! You will find the contra option across the ribbon on both the Customer and Supplier options. Take your pick which one you use, doesnt matter. Enter the date you wish to contra at (suggest you use the completion certificate date), click to link both invoices and you will get a message saying the amounts dont match, do you wish to allocate at the lower amount, click yes and the purchase invoice will be marked as paid. Then just link your Bank payment as a customer receipt and again job done!
Backup first then process and check
-- Edited by Marios on Thursday 20th of October 2016 03:20:34 PM
-- Edited by Marios on Thursday 20th of October 2016 03:25:45 PM
-- Edited by Marios on Thursday 20th of October 2016 04:24:57 PM
__________________
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
First of all thank you ever so much, once again. I really enjoy accounting but it's one thing studying and sitting exams and another actually dealing with everything in practice.
About the engrossment fees they are indeed the same thing. About our sales invoice, we're not sending it to the customer, it's for our own records.
About the contra option I don't know why but it's not there for us. I think we have a simplified version of Sage 50 accounts, not plus or professional, anyway it's not there.
The adjustments bank will do the job just fine.
Since you've suggested before, I now always back-up before I do something. I head all that red in the transactions list
lol
