I am preparing an exercise to represent the sale of property, 50% of which is claimable through a liability account, which is created temporarily to keep track of payments due to be received from the government. Is this good practice?
The problem is that the way I have been forecasting the debit and credit entries, does not seem to reconcile the liability account created, so what am I doing wrong?
Hypothetically, the Prime Minister has proposed a new scheme whereby construction projects which are settled within 3 months of being finished, are subject to a 10% subsidy, as long as the developer has confirmed that the works are up to the latest standards.
This is being done to encourage the prompt settlement of payments to developers, and, to encourage more property sales, since the property prices seem to be falling according to the latest economic forecasts.
Your company has decided to pay the restoration fees of €100,000 which are VAT exempt without credit i.e. zero VAT rate is to be charged to the developer, however no VAT can be claimed on expenses incurred during the restoration works.
The following entries are to be booked within the general ledger (Accounting > General Ledger Movements), and, the payment received from the relevant government department – which is to be announced after the election is to be posted against a transfer account set-up for the purposes of reconciling whether your company has received all the payments due under this scheme.
01/01/2012 Dr Current account 1 (1150) €100,000 excl. 0% VAT
01/01/2012 Cr Improvements to buildings (0080) €100,000 excl. 0% VAT
01/01/2012 Dr Debtors control account (1101) €50,000
01/01/2012 Cr Improvements to be claimed (2215) €50,000
NOTE New liability account created through Accounting > General Ledger Movements if they do not already exist.
The accounts have been prepared on BISL Standard Two training database.
Improvements to be claimed (2215) are a current asset because the payment is expected to be received within three months.
We received the payment from the Treasury Department on 15/03/2012, therefore we may post the entry directly through Accounting > General Ledger Movements:
15/03/2012 Dr Current account 1 (1150) €50,000
15/03/2012 Cr ??
€65,000 which excludes any stamp duties and other charges is to be charged to the property agency, Moira Grech, whose offices are at 40, Rue D'Argens, Gzira.
The agency charges no commission to the developer, however it reserves the right to revalue the property according to market prices.
Stamp duties and other taxes will be calculated by the notary at a later stage, in the meantime you are required to prepare a proforma invoice for €150,000 excluding VAT at 0%.
You have agreed on a payment schedule as follows with the agency:
20% on 15/03/2012, after the manager representing the agency has inspected the premises and we have confirmed that the Notary and MEPA have confirmed that the respective searches and permits are in order.
40% on 15/03/2013
40% on 15/03/2014
Stamp duties and other taxes will be invoiced to the client and added to the invoice to be issued on the next payment date.
For example, if the Notary notifies us of the fees and taxes due on 12/03/2012, we would then charge it against the invoice to be issued on 15/03/2012.
How much profit will the auditor account within the profit and loss account when finalizing the profit and loss accounts and balance sheet?
Does this take into consideration the time value of money i.e. interest that would be chargeable if part payments were not allowed to the customer?
How would you estimate
You can either issue manual invoices and leave them unsigned until you print them. This can be done from Client > Invoice to Client.
You can create job services to charge fixed payments in the proportions mentioned above. This can be done from Client > Services on Job, or,
Client > Job, when the jobs have been enabled by the application administrator.
NOTE: The VAT rates above may not reflect the actual rates applicable within the construction industry,
you may wish to confirm with a financial controller for the exact regulations which apply.
Once you have configured a setting within the application it is recommended to ensure you understand the effects of changing these options, and therefore,
you may want to review your organization's policies for accounting, finance, and reporting.
The problem is that the way I have been forecasting the debit and credit entries, does not seem to reconcile the liability account created, so what am I doing wrong?
Hypothetically, the Prime Minister has proposed a new scheme whereby construction projects which are settled within 3 months of being finished, are subject to a 10% subsidy, as long as the developer has confirmed that the works are up to the latest standards.
This is being done to encourage the prompt settlement of payments to developers, and, to encourage more property sales, since the property prices seem to be falling according to the latest economic forecasts.
Your company has decided to pay the restoration fees of €100,000 which are VAT exempt without credit i.e. zero VAT rate is to be charged to the developer, however no VAT can be claimed on expenses incurred during the restoration works.
The following entries are to be booked within the general ledger (Accounting > General Ledger Movements), and, the payment received from the relevant government department – which is to be announced after the election is to be posted against a transfer account set-up for the purposes of reconciling whether your company has received all the payments due under this scheme.
01/01/2012 Dr Current account 1 (1150) €100,000 excl. 0% VAT
01/01/2012 Cr Improvements to buildings (0080) €100,000 excl. 0% VAT
01/01/2012 Dr Debtors control account (1101) €50,000
01/01/2012 Cr Improvements to be claimed (2215) €50,000
NOTE New liability account created through Accounting > General Ledger Movements if they do not already exist.
The accounts have been prepared on BISL Standard Two training database.
Improvements to be claimed (2215) are a current asset because the payment is expected to be received within three months.
We received the payment from the Treasury Department on 15/03/2012, therefore we may post the entry directly through Accounting > General Ledger Movements:
15/03/2012 Dr Current account 1 (1150) €50,000
15/03/2012 Cr ??
€65,000 which excludes any stamp duties and other charges is to be charged to the property agency, Moira Grech, whose offices are at 40, Rue D'Argens, Gzira.
The agency charges no commission to the developer, however it reserves the right to revalue the property according to market prices.
Stamp duties and other taxes will be calculated by the notary at a later stage, in the meantime you are required to prepare a proforma invoice for €150,000 excluding VAT at 0%.
You have agreed on a payment schedule as follows with the agency:
20% on 15/03/2012, after the manager representing the agency has inspected the premises and we have confirmed that the Notary and MEPA have confirmed that the respective searches and permits are in order.
40% on 15/03/2013
40% on 15/03/2014
Stamp duties and other taxes will be invoiced to the client and added to the invoice to be issued on the next payment date.
For example, if the Notary notifies us of the fees and taxes due on 12/03/2012, we would then charge it against the invoice to be issued on 15/03/2012.
How much profit will the auditor account within the profit and loss account when finalizing the profit and loss accounts and balance sheet?
Does this take into consideration the time value of money i.e. interest that would be chargeable if part payments were not allowed to the customer?
How would you estimate
You can either issue manual invoices and leave them unsigned until you print them. This can be done from Client > Invoice to Client.
You can create job services to charge fixed payments in the proportions mentioned above. This can be done from Client > Services on Job, or,
Client > Job, when the jobs have been enabled by the application administrator.
NOTE: The VAT rates above may not reflect the actual rates applicable within the construction industry,
you may wish to confirm with a financial controller for the exact regulations which apply.
Once you have configured a setting within the application it is recommended to ensure you understand the effects of changing these options, and therefore,
you may want to review your organization's policies for accounting, finance, and reporting.