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I have an invoice dated in one tax year but paid in the next.

Customer Question

I have an invoice dated in one tax year but paid in the next. Which accounts should i put it in?
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I'm Keith and happy to help you with your question. I will give you the definitive accounting answer for starters.
It should be entered as a debtor in the accounts of the earlier tax year. A typical book keeping entry might be Debit Debtors, Credit Sales. This would ultimately be reflected as a greater contribution to the Profit and Loss Account.
When the moneys are received in the later tax year then the book keeping entry would be debit Cash/Bank, Credit Debtors thus clearing the Debtors account ledger heading with the higher cash balance being reflected in Cash/Bank balances.
I would point out, however, that many traders would merely wait until the moneys are actually received, after all the whole transaction might go for a ball of chalk, and post Debit Cash/Bank, Credit Sales in later year. In fact if trading is continuous it is a swings and roundabouts situation and does not alter the price of cheese in the great scheme of things. It would not attract HMRC adverse attention unless the sale in itself was unusually and significantly large and would skew the profit for the two account periods.
I do hope I have thrown some light on your conundrum for you. It is such a common situation one should not loose any sleep over the matter.
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3381
Experience: FCCA FCMA CGMA ACIS
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Expert:  bigduckontax replied 2 years ago.
Thank you for your support.

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