Can someone please help. I do the books for a small corporation but I am not a real experienced. The owner has started another small reno business which will be operating under the same Business Number as an "umbrella company". On one of the reno jobs, the owner paid for material for the job with a Visa Card that is owned by the Corporation. Under the Corporation, I have the Visa Card set up as a vendor, and when the monthly statement comes in, I go through all the receipts and post them to the correct account numbers, then I post it as a Pay later bill. The reason I have it set up as a Vendor, is because I make payments and don't pay the whole amount at once. In order to post the purchases made with the Visa for the reno business, I set up it up this way.
Under the Corporations set of books: I set up an “other asset account” and called it “Loan due to/from the reno co" so that this is an asset of the Corporation. I then posted the purchases paid for the materials with the Visa to this account when I entered the receipts from the Visa Statement.
Then, under the Reno co. set of books: I set up an “other current liability” account and called it “Loan due to/from the corporation" so that this will be a liability owing to the corporation. I then posted the purchases like this:
DR the "costs of goods sold" account for the purchases
DR the "HST paid on the purchases" account
CR the "loan due/to the corporation"
When I billed out the client, I set out the details of the purchases and entered the amounts on the invoice the same way as I would enter any other service and posted it to the revenue account.
I am not sure if this this the correct way of doing this. To me, it seems very time consuming and convaluted but I don't know another way of doing this. I am also wondering, if the loan should be paid back to the Corporation for the material purchases once the customer pays the invoice and how I would do that.
My guess is that I should set up the corporation as a vendor in the Reno co. books, create a bill for the amount of the expense and enter under the description something like, “repayment to corporation for payment of materials”, post it to the “Loan due/to the corporation", then issue a cheque and deposit it into the Corporations bank account. This way, the HST will be recorded as HST paid on the item so it can be included in the HST report. Then under the Corporations set of books, post it as:
DR the Bank Account
CR the Asset Account
Does this make sense or am I overthinking this way too much.
