Accountancy service looking for advice on customer's invoices?

[cally1990]

Accountancy service here

We have a client who has his own LTD company.

We issued from his LTD company (ABC LTD) Invoices for his services over the period March to Present for net plus 23% vat as standard to his customer (EFG LTD)

Our client/the director of the company (ABC LTD) contacted us today to say he is purchasing a piece of work machinery from the same company he is providing professional services to (EFG) worth in the region of 9k plus 23% vat

No problem says us, get the invoice from them sent over to his LTD company
and when his company has the funds, we will make payment from his company bank account for the 9k plus vat.

he said he is already after paying 2k from his own current account to them towards the asset and
says, the company who owes him about 15k for services anyway is just not going to pay his invoices for the balance of the asset (to square each other up) and call it that.

I'm lost what to do here?

Do I credit note the sales invoices for services for his work for the period for the exact amount of the balance of the asset (net plus vat)
and reimburse the director 2k plus vat amount from company funds as an expense reimbursement for his contribution towards the work expense?

also, on a side note the expense isn't an asset of the company nor did the company purchase it at all?(but rather reimbursed the director for a % of the cost he paid directly)

any advice would be great

 

[torblednam]

This is pretty straightforward.

The company's sales are its sales, leave them alone, credit notes have no role in this.

A simple way to treat this is:

1. The company is buying an asset and will need to get a VAT invoice from the other crowd. Dr. Asset, Dr. VAT, Cr. Creditors

2. The company now has a creditor for the full (gross) value of the asset purchase. This is partly cleared by an advance of funds from the director, (which I think is about 2.5k?), so Dr. Creditors (2.5k), Cr. Directors Loan (2.5k).

3. The balance of the purchase value is to be cleared by a contra of money owed by the other company (i.e. debtors) against money owed to that company for the asset (i.e. creditors). So the entry is Cr. Debtor, Dr. Creditor.

That accounts for the asset purchase, the VAT on it, and creates a loan balance owed by the company to the director. This money can be paid directly to the director at any point (CR. Bank / Dr. Directors Loan balance).

 

[cally1990]

This is pretty straightforward.

The company's sales are its sales, leave them alone, credit notes have no role in this.

A simple way to treat this is:

1. The company is buying an asset and will need to get a VAT invoice from the other crowd. Dr. Asset, Dr. VAT, Cr. Creditors

2. The company now has a creditor for the full (gross) value of the asset purchase. This is partly cleared by an advance of funds from the director, (which I think is about 2.5k?), so Dr. Creditors (2.5k), Cr. Directors Loan (2.5k).

3. The balance of the purchase value is to be cleared by a contra of money owed by the other company (i.e. debtors) against money owed to that company for the asset (i.e. creditors). So the entry is Cr. Debtor, Dr. Creditor.

That accounts for the asset purchase, the VAT on it, and creates a loan balance owed by the company to the director. This money can be paid directly to the director at any point (CR. Bank / Dr. Directors Loan balance).

Thanks so much, that makes perfect sense