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Level 1

Help with Supplier Credit and Invoices on vehicle purchase please

Hi, please could someone help with the following

We have purchased a vehicle which is X Amount plus VAT

The have allowed a Part Exchange amount plus VAT as we are VAT registered too.  They requested we raise a sales invoice to invoice them for this amount, which I've done.

I've entered their invoice as a Bill and also raised a supplier credit for the Part Exchange, I've matched payment made to this bill as well as the supplier credit.  That's now showing £0 but I am still left with an unpaid invoice to them for the Part exchange amount.

 

Please could someone advise, thank you very much.

Solved
Best answer September 21, 2020

Accepted Solutions
Level 3

Help with Supplier Credit and Invoices on vehicle purchase please

By raising an invoice and then raised a supplier credit note for the part exchange, you have effectively posted the same transaction twice, but only one of them (the supplier credit note entry) has been "paid off" when it was set-off with the supplier bill in the Pay Bills posting.

 

There are two ways to correct this.

 

The first is to simply delete the invoice, and that would be the end of it. The reason for this action is because you were merely using QBs to generate a VAT invoice for the sale of the old car (which you could have done outside QBs using a business headed paper to type out an invoice). The settlement of the part-exchange amount has been dealt with by credit note in the supplier account.

 

The second option is the full accounting treatment of every transaction on the purchase and part-exchange deal. You retain the invoice issued for the part-exchange, delete the supplier credit note and delete the balance payment in the supplier account. Then you proceed to pay the bill for the new car in full, followed by Receive Payment for the part-exchange amount. The difference between the payment and receipt entries must equal the actual amount paid to the car dealer.

 

The second method is more correct in terms of VAT accounting, considering that the VAT and net value of the part-exchange should land in Boxes 1 and 6 of VAT return because your business made a sales.

 

More importantly, for either methods, the full net amount of the new car should appear on the vehicle fixed asset account on the balance sheet, and not the balance amount after part-exchange; and the net book value of the old car is transferred to a disposal P&L account to off-set against the part-exchange net value.

View solution in original post

2 REPLIES 2
Level 3

Help with Supplier Credit and Invoices on vehicle purchase please

By raising an invoice and then raised a supplier credit note for the part exchange, you have effectively posted the same transaction twice, but only one of them (the supplier credit note entry) has been "paid off" when it was set-off with the supplier bill in the Pay Bills posting.

 

There are two ways to correct this.

 

The first is to simply delete the invoice, and that would be the end of it. The reason for this action is because you were merely using QBs to generate a VAT invoice for the sale of the old car (which you could have done outside QBs using a business headed paper to type out an invoice). The settlement of the part-exchange amount has been dealt with by credit note in the supplier account.

 

The second option is the full accounting treatment of every transaction on the purchase and part-exchange deal. You retain the invoice issued for the part-exchange, delete the supplier credit note and delete the balance payment in the supplier account. Then you proceed to pay the bill for the new car in full, followed by Receive Payment for the part-exchange amount. The difference between the payment and receipt entries must equal the actual amount paid to the car dealer.

 

The second method is more correct in terms of VAT accounting, considering that the VAT and net value of the part-exchange should land in Boxes 1 and 6 of VAT return because your business made a sales.

 

More importantly, for either methods, the full net amount of the new car should appear on the vehicle fixed asset account on the balance sheet, and not the balance amount after part-exchange; and the net book value of the old car is transferred to a disposal P&L account to off-set against the part-exchange net value.

View solution in original post

Level 1

Help with Supplier Credit and Invoices on vehicle purchase please

Thank you very much indeed for your help, that's where I was going wrong, having the sales invoice as well as the supplier credit.  I followed the steps in the suggested second option.