Bills Flashcards
When a firm submits a bill to a client what must it charge them for?
Both profit costs and VAT
What are profit costs?
Sometimes called professional fees or charges - the firm will charge the client profit costs for the legal services it has provided
What is the current rate of VAT?
20%
How often does a firm complete a VAT return for submission to HMRC?
Every 3 months
What are the accounting entries required to record the submission of a bill to a client?
There will be two pairs of double entries - one relates to profit costs and the other relates to VAT:
1) debit client ledger business account and credit profit costs ledger
2) debit client ledger business account and credit VAT ledger
What is an abatement?
It is an agreed reduction in a client’s bill
What are the account entries to record the abatement of a bill?
Two pairs of double entries, one for profit costs and one for VAT:
1) credit client ledger business account and debit profit costs ledger
2) credit client ledger business account and debit VAT ledger
When reducing a bill, what do the accounting entries reflect?
The amount of the agreed abatement, that is, what the bill has been reduced by not what it has been reduced to
If a firm is not already holding money on behalf of the client in the client account and the client makes a payment for a bill what account will that be paid into?
The business account as it is business money not client money
What are the accounting entries required for receipt of money into the business account?
1) credit client ledger business account
2) debit the cash sheet business account
What are the accounting entries if the firm is transferring the relevant sum for the bill from the client account to the business account?
Two pairs of double entries:
1) debit client ledger client account and credit cash sheet client account
2) credit client ledger business account and debit cash sheet business account
