Trade Creditor/Debtor and Accruals Trade Creditor/Debtor and Accruals
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  1. #1

    Contractor Among Contractors


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    Default Trade Creditor/Debtor and Accruals

    Just want to clarify my understanding, I know that practically it makes no odds, but which is more correct :-

    Client overpays an invoice, or you invoiced incorrectly and issued a credit note, but the client paid anyway. Is this a Trade Creditor or an Accrual ?

    Client says can you please offset it against future invoice(s). Is this now/still a Trade Creditor or an Accrual ?

    VAT payment to HMRC for the final qtr (of company year) is known but not due until after year end. Is this a Trade DebtorCreditor or an adjustment to the "cash in hand and at bank" figure?

    "Either" is also an option.

    Thanks.
    Last edited by Contreras; 1st August 2020 at 16:35.

  2. #2

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    Default Trade Creditor/Debtor and Accruals

    You might be over-thinking it. Or maybe I misunderstand.

    A debtor is who owes you. No one in your examples is a debtor other than your company. Both the client who overpaid, and the tax man, are creditors....

    Although the tax man isn’t actually a creditor till the VAT return is completed. It’s just not wise to spend the money that you know you’ll owe very soon.


    Oh. And what does your accountant say?
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  3. #3

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    Not overthinking it, just curious.

    Over the years I've seen different methods from accountants. Practically it makes no odds. Deducting VAT from bank balance is a new one on me though.

    Quote Originally Posted by Lance View Post
    No one in your examples is a debtor other than your company. Both the client who overpaid, and the tax man, are creditors....
    Err, yeah..

  4. #4

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    Quote Originally Posted by Contreras View Post
    Not overthinking it, just curious.

    Over the years I've seen different methods from accountants. Practically it makes no odds. Deducting VAT from bank balance is a new one on me though.



    Err, yeah..
    Deducting then VAT from the bank balance before it’s been paid sounds wrong. And if submitted like that in your year end accounts is incorrect and potentially fraudulent.
    Your accounts are supposed to represent the facts now, not the facts in a few months.
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  5. #5

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    Quote Originally Posted by Contreras View Post
    Just want to clarify my understanding, I know that practically it makes no odds, but which is more correct :-

    Client overpays an invoice, or you invoiced incorrectly and issued a credit note, but the client paid anyway. Is this a Trade Creditor or an Accrual ?
    Thanks.
    Deferred Income

    Quote Originally Posted by Contreras View Post
    Client says can you please offset it against future invoice(s). Is this now/still a Trade Creditor or an Accrual ?
    Thanks.
    Still deferred income.

    Quote Originally Posted by Contreras View Post

    VAT payment to HMRC for the final qtr (of company year) is known but not due until after year end. Is this a Trade DebtorCreditor or an adjustment to the "cash in hand and at bank" figure?

    "Either" is also an option.

    Thanks.
    It's a liability on the balance sheet under Other taxes and social security costs

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