UK Recharge Accounting - Help/Advice needed


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Hi,

I currently work in finance where I am processing intercompany recharges. I need some advice and was hoping fellow professionals could help me out.

Currently, the company I work for (lets call it Company A) receives invoices which may have costs that relate to Company A and an intercompany entity (lets call it Company B).

Due to location and ease of payments, Company A will make the payment to the supplier. so currently the double entry we are doing is
CR - Vendor in Comp A's books
DR P&L expense A/C in Comp A

then recharge and raise a sales invoice to Company B
DR - AR in Comp A
CR - Same P&L Expense used above to offset the expense to make zero. - Company B will then process the intercompany invoice in their own books.

so cut a long story short, i have three questions.

1) is the above process correct?

2) would it not be easier or is it possible to create a balance sheet account in Company A's Chart of Accounts, where all costs relating to other entities are booked to this Balance Sheet account, and on a monthly/quarterly basis, Company A recharges everything that is in this balance sheet account to Company B or any other companies that the cost relates to. this way, I know that my balance sheet account should always be zero once the invoice has been issued

3) in terms of sales invoices / revenue etc, does income from recharges classify as non op income?

Thanks and i look forward to seeing replies / suggestions.
 
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Fidget

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1) Your process is fine.
2) You could, but in my experience, having a single account as a holding place for items to be farmed out elsewhere is storing up trouble with reconciling it further down the line.
3) It's not income - it's just the cash back for the recharge.
 

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