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. 💚


Job interview

provato9provato9 WarwickshireRegistered Posts: 1
Hi good-morning and I wish you all have a happy Valentine's Day!
Could someone explain me what are recharges in accounting, please? Are they charges made when the customer doesn't pay in his deadlines,or not?
Thanks

Comments

  • CeeJaySixCeeJaySix Well-Known Registered Posts: 645
    Commonly these are costs incurred by one division or group company on behalf of another division of the same company or another company in the same group. The costs are therefore recharged to the division/company to which they relate.

    A very basic example:
    Co B is a subsidiary of Co A. Co A runs the payroll for the entire group, and makes the relevant payments to staff and HMRC. Co A then invoices Co B for the hours worked by staff on Co B projects in the month. The accounting entries would credit the staff costs back out of Co A, and debit them to Co B.

    Within a single entity this is a management accounts entry and wouldn't affect the stat accounts. However within a group if individual company accounts are prepared they would also affect the stats.

    Essentially it is the mechanism used to ensure costs are recorded in the right place when they are incurred by a part of the business that isn't the 'user'.
  • batouraybatouray Registered Posts: 4
    So you simply mean charging a cost to the right cost centre.
  • stevefstevef Well-Known CarmarthenRegistered Posts: 258
    Not really, its about one part of the business paying another part of the business for goods or services. eg a training department sets up a course for the sales department, if the sales department holds the budget for sales training, the training department will recharge the sales department to recover its costs.
  • Sharon123Sharon123 FMAAT Posts: 80
    Recharges may be internal between departments in the same company in which case it would be an adjustment in the management accounts. If there is more than one company in a group and each prepares accounts then a sales invoice might be raised in order to charge a share of costs. Eg company A arranges a training course from an external provider and half the places are for company B. When company A is invoiced for the course they might raise a sales invoice to company B for their share of the costs.
Sign In or Register to comment.