Accounting for Groups

marine
marine Registered Posts: 31 Regular contributor ⭐
in General accounting discussion
Hi all

Been to see someone today who has set up a group company, and also 2 limited companies to come under the Group.

They want to invoice for the 2 companies through the Group (i think they have a group VAT number), if they do this and all sales go through the Group do they need to do an internal sales invoice if the payment is received through the subsidary company.

i.e Group Ltd invoices A Ltd and B Ltd sales for the month, but then the invoice gets paid into A Ltd bank account, how do i account for this? Is it an internal invoice?

Any advice would be appreciated!

Thanks

Tim

Comments

  • Poodle
    Poodle Registered Posts: 711 Epic contributor 🐘
    HI Marine

    Inter company transfers within a group set up as a group for VAT do not have VAT on them i.e. they fall outside of the scope for VAT and so any invoices raised by the group for A + B will not have VAT on them.

    For transfers between companies as you describe you could set up 'inter company' loan accounts on the balance sheet and just post journals. You should then reconcile the accounts on a regular basis to ensure accuracy of your bookkeeping. For this obviously the two Dr balances on the group should always = the CR balance for companies A + B. When you send money to the group from A + B, CR Bank Dr Loan, and vice verser for the recipt into the group.

    Or you could raise sales invoices from the group with companies A +B being treated as a customer, then enter the invoices as a supplier invoice on A + B's accounts. Control then being through the sales and purchase leger.

    Outside customers will still have VAT invoices raised by A + B that will have output VAT on them, and when the outside customer pays you settle these accounts in the usual way when you enter the receipt into the outside customers sales ledger account.

    When A + B send money onto the Group account you just pay off through the P/L of A + B and then treat as a customer receipt in the Group sales ledger.

    Probably confused you further but it does work. It might be worth having a word with the auditors/accountant to see which method they prefer

    Regards

    Poodle
  • Nich
    Nich Registered Posts: 49 Regular contributor ⭐
    I work for a group of companies where we have a 'holding' company and then 4 subsidaries. The holding company often pays things/ invoices on behalf of the subsidaries.

    Like Poodle suggested, we have simply opened Inter Company accounts in the Balance Sheet for each company and post Journals between the Accounts/Companies. The Holding company will then have a Debit/ Credit Balance on the Balance Sheet and the Subsidary will have the opposite entry in theirs,

    Hope this makes sense- it does in my head!!

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