Accounting for expenses in Sage Accounts

[dazza12]

I've taken the jump and decided to run my own accounts, instead of sending receipts etc to my accountant and have them handle everything. I've done this both to save some money, but also to take more control of my own affairs as I'm planning to expand into other areas.

I'm currently contracting, and as part of my contract I claim rebilled expenses. I'm familiar with the double entry way of doing things, and speaking to my accountant, he's suggested the following route:

Dr Input VAT (VAT amount)
Dr Expense (net amount)(P&L)
Cr Purchase ledger
Being posting of the expense per the invoice.

Dr Purchase ledger
Cr Directors’ current account
Being payment of the invoice from my pocket.

Dr Directors’ current account
Cr Current account
Being the Ltd co repaying my expense.

I'd then physically transfer the relevant amount out to my personal account.

On paper, I can see how this works. However, I can't see how to account for this in Sage. My invoices (which my accountant originally submitted from timesheets but are now generated by me in Excel) usually contain my hourly rate and my expenses (mileage only), so both would be combined in the invoices that I'll enter from the beginning of the year and those going forward.

I'm assuming that I'd create a product or use a service line but use Sales Type B (or similar) to account for the Expenses. However, that would only take care of the invoicing itself, how would I account for the transfer to the Director's current account and then subsequently to my own account? Or am I getting the wrong end of the stick and getting it all wrong?

It's worth pointing out that my accountant does not use Sage, they use an in-house developed system so can't answer my question.

Thanks in advance for any help you can offer. I do plan to go on a couple of Sage courses later in the year, but finances and lack of time limit this at the moment.

[Clare@InTouch]

Sage is odd with the purchase ledger in that it will cause problems if you post journals.

You could set up a new bank account called "Directors Expenses Account". Use that to pay the expense on the purchase ledger (as if it were any other bank payment) and it will create a negative balance on that bank account. Then (in Sage) transfer funds from your company bank account to the new Directors Expenses Account - which in effect is simply the amount you've repaid yourself.

This way you know at a glance how much is owed to you in expenses too, as it's simply the negative balance on that bank account.

[dazza12]

Thank you. I did wonder if setting up another account for the Expenses was going to be the better route, as with all the other potential transactions it would get a bit confusing.

Am I right in thinking the best way to account for this at the invoicing stage is to use the Sales Type B (or it's renamed equivalent), and then do the transfer from (or to?) the Expense account?

[Clare@InTouch]

Thank you. I did wonder if setting up another account for the Expenses was going to be the better route, as with all the other potential transactions it would get a bit confusing.

Am I right in thinking the best way to account for this at the invoicing stage is to use the Sales Type B (or it's renamed equivalent), and then do the transfer from (or to?) the Expense account?

You can have two sales types for the income if you want, although it's not strictly necessary it might be nice to do it for clarity - use A for Fees and B for Expenses. The actual expenses themselves should just get posted to whichever nominal account is appropriate (so have the £100 advertsing you recharged as a credit in Sales B and a debit in Advertising).

As long as there is both a debit and credit you won't suffer tax on the extra income, which is what you're aiming for.

[Sockpuppet]

Set up a DLC bank account.

When you pay for something pay normall to the correct nominal code and pay using this bank account. Then when you pay yourself transfer money from company bank account into this account to clear the numbers.

[BolshieBastard]

Sage is odd with the purchase ledger in that it will cause problems if you post journals.

You could set up a new bank account called "Directors Expenses Account". Use that to pay the expense on the purchase ledger (as if it were any other bank payment) and it will create a negative balance on that bank account. Then (in Sage) transfer funds from your company bank account to the new Directors Expenses Account - which in effect is simply the amount you've repaid yourself.

This way you know at a glance how much is owed to you in expenses too, as it's simply the negative balance on that bank account.

You can say that again! In fact, Id go so far as to say Sage is vastly overrated and, well, tulip really.

I had to put up with that pile of pooh for a franchise I ran. It was unwieldly and complicated.

Personally, I dont have enough time in my life to piss about with the likes of Sage. I'd rather pay my accountant to do the accounts.