Home For AAT student members General AAT student discussion
Current updates regarding coronavirus (Covid-19) and the precautions AAT are taking will be continually updated on the below page.

Please check this link for the latest updates:
We hope you are all safe and well and if you need us we will be here. 💚


Internal Invoicing

lgarsidelgarside Well-KnownRegistered Posts: 122
Hello is anyone able to tell me what the T account entries are for internal invoicing. Where I work say if dep A was to supply a service to dep B the entries are to Dr the expense and credit the creditors control a/c for B, when the invoice is raised this credits income for A and debits the debtors control but how do you clear out both of the control accounts because you don't need to physically trf the money as this would be just company money going in and out?

Any help greatly appreciated.

Comments

  • Nilesh MandviaNilesh Mandvia Feels At Home Registered Posts: 91
    Internal Invoicing

    You have to do contra entry between sales ledger control account and purchase ledger control accounts. So under this circumstances, you can do the following entry to clear the accounts.

    Debit Creditors control account
    Credit Debtors control account

    In real life, I would do differently. Instead of invoice, I would open an income account and expense account just for the departmental transactions. Then I would just do the journal between expense and income account using non-vatable code. Then do not have to worry about clearing the accounts.

    Dr Expense account with department code B
    Cr Income account with department code A

    I am going to mentioned some obvious pitfalls when you do internal transaction.

    You have to use non-vatable code for whichever method you use, either invoice or journal. As these are internal transaction, they should not be included in vat return.

    Also at end of the year you have to cancel out the income and expenses as this is internal transaction, they should not be included within reported income for the entity.

    I hope this helps.

    Nilesh
Sign In or Register to comment.