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Thread: Owner payment to W+E bill query

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    Owner payment to W+E bill query

    Good day to all

    I have a hypothetical question that I wondered if anyone can help me with.

    The information I have is that the owner of an entity paid the company's water and electricity bill out of his own personal bank account because business banking was offline. The amount is hypothetically R9000, and the company is a VAT Vendor.
    Can anyone advise me of a way of recording this transaction as I am unsure of if the owner would be recorded as a Creditor in the entity's general journal?
    My recording:

    Dr/ Rent expense R....
    Dr/ VAT Input R.....
    Cr/ Creditors control/Owners details R9000

    Please advise if VAT Input is applicable, but I believe it is since it is not a Capital contribution, but I am unsure. If my entries are incorrect, please advise me on how to correct them.

    Thanks in advance!

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    Just to add, the entity pays commercial rent, so to my knowledge when the company is paying rent out of its own bank account, VAT Input is applicable?

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    Site Caretaker Dave A's Avatar
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    Is the Tax Invoice made out to the company or the owner?

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    Diamond Member Justloadit's Avatar
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    This happens to me many times, where I use my credit card to do COD purchasing, simply because the company does not have a credit card to make a purchase.
    Not sure if this is the correct method.

    I get the invoice made out to the company with the VAT number, so that the company can claim VAT when entering it in the books.
    I then make a payment from the company to my Credit Card, the payment is reflected against the invoice as paid.
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    The Tax invoice is made out to the company.

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    So lets say if the company does not immediately pay back the amount before end of month, would the accounts affected be creditors control/owner, since the company will owe the owner this money back?

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    Diamond Member Justloadit's Avatar
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    Quote Originally Posted by DGi View Post
    So lets say if the company does not immediately pay back the amount before end of month, would the accounts affected be creditors control/owner, since the company will owe the owner this money back?
    This is an accounting procedure, which is dependent on how the company does its books.

    The owner's loan account can be used for payment entry, then when the owner is paid, the amount will be deducted from the loan account.
    Victor - Knowledge is a blessing or a curse, your current circumstances make you decide!
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