Abatements

Question 1

What is an abatement?

Answer 1

After an invoice has been issued to a client they may dispute it if they are not happy with the level of fees and the firm may agree to abate the invoice. An abatement is just the firm agreeing to reduce the bill that has already been issued

Question 2

VAT

Answer 2

If the fees are going to be reduced then the VAT payable on those fees will also need to be reduced and entries will need to be made in the ledgers reflecting the reduction in fees and VAT payable on them

Question 3

Example - Question

Answer 3

How to record a reduction in fees of £500

Question 4

Answer

Answer 4

Debit profit costs account 500 and credit business account of client ledger 500. Debit HMRC ledger 100 and credit business account of client ledger 100