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Thread: How to process a purchase by owner

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    How to process a purchase by owner

    Good morning,

    I need to process a purchase of a galaxy tab for business use into Pastel accounting that the owner purchased with his personal credit card.

    Do I process this in the general journal and can you assist with what the contra account for this should be? Also do I process the VAT amount as a second line item? Or by inserting the code 01 into the first line item does that mean that Pastel Accounting will sort out the allocation of the VAT automatically?

    Another question, not related to the above... is that I processed a Supplier's invoice incorrectly in Pastel Accounting in May this year. I only came across the error now. We paid the correct amount as per their invoice but I loaded R913 instead of R931 in Pastel. How do I correct this now?

    Thank you!

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    Platinum Member Mike C's Avatar
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    Hi JeandA - I would pay the owner from the business bank account and then enter it in the cash book - putting it to "Office Equipment at Cost".

    If the item cost more that R5000.00 you need a full Tax Invoice with all the business details and VAT number on it.

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    Entering it as 01 in the cash book would then allocate the VAT automatically.

    Because it was bought on the boss's personal credit card, however, the VAT may not be claimed. If you have a review/audit and SARS request the documentation they would not allow it.
    An education isn't how much you have committed to memory, or even how much you know. It's being able to differentiate between what you do know and what you don't. - Anatole France

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    Platinum Member Mike C's Avatar
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    In response to your second question. If no VAT is involved you can enter the difference under the same date and Invoice number as previously.

    If VAT is involved it always complicates it a bit. You could do a Return Debit for that Supplier for R913 in the current month (using VAT) and then re-enter the Supplier Invoice for the correct amount of R931 (also using VAT). This would then reverse and re-enter the VAT correctly as well as correct the the Supplier's total.

    Always make a backup of your company before trying any correction. If you make a mess of it or it doesn't work as you were expecting it to, you can always restore your company to that point.
    An education isn't how much you have committed to memory, or even how much you know. It's being able to differentiate between what you do know and what you don't. - Anatole France

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    Diamond Member Justloadit's Avatar
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    Quote Originally Posted by Mike C View Post
    Because it was bought on the boss's personal credit card, however, the VAT may not be claimed. If you have a review/audit and SARS request the documentation they would not allow it.
    I disagree here, I often purchase stock for the company using my credit card, because it is simply easier to do the transaction. I make sure that the invoice bears the company name and VAT number.
    When entering it into the books, I enter it as a COD supplier with the name of the supplier and invoice number and allocate it to stock, or supplies depending on the item, I then pay the credit card directly from the bank account using the suppliers name as a reference. The bank shows an entry on the statement as supplier ABC and the amount.
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    Platinum Member Mike C's Avatar
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    I make sure that the invoice bears the company name and VAT number.
    And that's the important part! If you have that ... then I agree. There is no problem. Sorry for being unclear.
    An education isn't how much you have committed to memory, or even how much you know. It's being able to differentiate between what you do know and what you don't. - Anatole France

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    Bronze Member Beancounter's Avatar
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    I find it easier to create a bank account for payments made by the owner. I set the account up as a cash book and enter all payments the owner made into that cash book. You post the payment to where ever it is meant to be debited and select the relevant VAT indicator. This way you don't involve journals if VAT is applicable. The balance of the account is cleared to the owner's loan account on a monthly / annual basis.

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    Mike C (04-Sep-14)

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    Bronze Member Beancounter's Avatar
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    Quote Originally Posted by Mike C View Post
    Because it was bought on the boss's personal credit card, however, the VAT may not be claimed. If you have a review/audit and SARS request the documentation they would not allow it.
    If the document is a proper (cash) Tax Invoice as per Section 20(4) of the VAT Act, the vendor should have no problem claiming Input VAT. The vendor purchases the goods / services in the furtherance of its business activities and reimburses the owner for expenses paid on its behalf. No problem there. If the invoice is in the owner's name, the vendor only has to show that the owner acted as an agent for the vendor in terms of Section 54(2) and 54(3) of the VAT Act and Input VAT will be allowed. This is especially the case where the cell phone contract is in the employee's name but the employer pays the monthly account.

    Bear in mind that only expenses in the production of VATable sales will qualify so private usage has to be excluded. By VATable it is meant VAT at 14% or at 0%. If you sell goods or services that are exempt from VAT, no Input VAT claim will be allowed.

  9. Thank given for this post:

    Dave A (10-Sep-14), dellatjie (09-Sep-14), Mike C (10-Sep-14)

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    Site Caretaker Dave A's Avatar
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    Quote Originally Posted by Beancounter View Post
    If the invoice is in the owner's name, the vendor only has to show that the owner acted as an agent for the vendor in terms of Section 54(2) and 54(3) of the VAT Act and Input VAT will be allowed. This is especially the case where the cell phone contract is in the employee's name but the employer pays the monthly account.
    That little gem deserves more than a thank you. Really, really appreciated.
    The trouble with opportunity is it normally comes dressed up as work.

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    Platinum Member Mike C's Avatar
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    And I stand corrected! Thank you Beancounter.
    An education isn't how much you have committed to memory, or even how much you know. It's being able to differentiate between what you do know and what you don't. - Anatole France

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    Bronze Member Beancounter's Avatar
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    Awwww, you guys!



    Hehe!

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