Bills

Question 1

What’s the rule in relation to profit costs?

Answer 1

A firm must keep a record of all bills which must be readily accessible.

Question 2

What’s the rule in relation to VAT

Answer 2

Firms must keep accurate records for VAT so that it can account to HMRC.

Question 3

What does the HMRC VAT ledger record?

Answer 3

The output VAT that the firm has charged when providing legal services to clients and the input VAT paid when buying goods or services needed to run the business.

Question 4

What accounting entries are required when submitting a bill?

Answer 4

DR client ledger business account and CR profit costs ledger
DR client ledger business account and CR HMRC-VAT ledger

NO ENTRIES IN CASH SHEET BECAUSE CLIENT HAS NOT YET PAID BILL.

Question 5

What is an abatement?

Answer 5

A reduction in the client’s bill

Question 6

What accounting entries will be made for an abatement?

Answer 6

CR client ledger business account, DR profits costs ledger.

CR client ledger business account, DR HMRC-VAT ledger.

Accounting entries will reflect the amount the bill has been reduced by.