UK Client money


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Hi
I have a business where I get money back for my customers in respect of ppi charges etc. I have a specific bank account where the money is paid in, I then pay my fees to my main business account & send a cheque for the remainder to my customers.

Just wondering how I record the client money in my accounts? I have an accounting package which I use, it has areas for current account, savings account, credit card account & cash account.

Thanks
 
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I have a balance sheet account under current liabilities named Client Monies. When I receive money on behalf of clients I debit the bank and credit Client Monies. When this money gets paid out I do the reverse.

In your case, let's assume that you receive £1000 and take £100 in fees.

So,

CR Client Monies £1000
DR Bank £1000

Invoice your client for £100 (debit client / credit sales), than then issue a credit note (to show that the client has paid) but instead of debiting sales, debit Client Monies, which leaves a balance in Client Monies of £900.

Then pay your client:

DR Client Monies £900
CR Bank £900

You will now have a nil balance on both your Client Monies (balance sheet) account and your client's sales ledger account.

HTH.
 
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Joined
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The reason I set up a separate balance sheet account under current liabilities is because it makes the accounts clearer. If you post the monies received in a sales ledger account it is not as clear on the balance sheet as it is lost in the total of the Debtors' Control Account.

As for creating the account, this will depend on your accounting software package but it's very simple in both Sage and Quickbooks.
 

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