Contractor and Subcontractor P&L entries - help

System
System Posts: 100,537 🤖 Admin 🤖
edited June 9 in AAT member discussion
Can somebody clear my mind, please, it's in a spin?!

A partnership acts as both contractors and subcontractors.

An invoice issued by them for 'Labour and Materials' for let's say £470 (gross), £400 (net) and £70 (Vat) has at the bottom 'Labour content £100'.

My questions are:

1 What are the accounting entries for this?

2 Precisely how is the expense total for subcontracting labour arrived at?

Thanks very much for any help.

Comments

  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Contractor and Subcontractor P&L entries - help

    Is this work being done under CIS? If so, then I guess that the reason for specifying the labour content is that is the amount that will have CIS tax (18%) deducted. The contractor that they have invoiced will then pay:

    Materials £300.00
    Labour £82.00 (£100 - 18% CIS tax)
    VAT £70.00

    Total = £452.00

    P&L entries

    Dr debtors £470.00
    Cr sales - materials £300.00
    Cr sales - labour £100.00
    Cr VAT £70.00

    Labour could have been worked out in lots of different ways - per hour, fixed price for the job, best guess, think of a figure..... :D

    Hope this helps you.
    Claudia
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Contractor and Subcontractor P&L entries - help

    Thanks, Claudia. Very helpful!

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