I started using Solar Accounts yesterday, to try to get our books in order (we are a 3-man start-up, with a lot of IT experience, but no accounting or bookkeeping knowledge). Firstly, I'd like to congratulate you on a great product - easy, intuitive and simple to use; has saved me a lot of head-aches just in the last 24 hours!

My question is probably quite dumb, but here goes anyway.

My partners and I have been using our personal bank accounts to buy various things like office equipment and pay for work-related travel. We've recently received payment for our first few invoices, so we'd like to pay ourselves for those expenses, and claim the VAT back.

What is the best way to record expenses against individual people in Solar, and be able to report on that, and keep the books straight? Given that we are also paying ourselves variable salaries, recorded against the Employee Expenses account.

Ideally I would like to be able to track what expenses we are due, what have been paid, and be able to distinguish between those and salaries/payroll?

Many thanks!

Hi Mike,

When you (or a partner) pay for a business expense from your personal funds you are effectively giving a loan to the business. A good way to record this is to create a new liability account called, say, 'Loan from Mike B'. Then record an expense in the usual way except set the Paid From Account to 'Loan from Mike B'. When you are reimbursed for the expense, record a General Transaction from the 'Cheque Account' to the 'Loan From Mike B' account.

Cheers,

Thank you for the speedy reply!

One further question I have - what is the best way to deal with VAT in this case?
The issue being that we have some expenses we've paid for from our personal accounts before the company could reimburse us, and during an earlier VAT reporting period.

I am thinking that when I record the original expense against the "Loan from Mike B" account, and with the date from some months back, it should be out of scope for VAT, as the company has not incurred the expense yet, so it should not appear on the VAT return then.
But when the company reimburses us this month, VAT should be recorded against that entry? So it will appear on the VAT return that includes this month?

Once again, congratulations on a great product - I definitely am intending on upgrading from the trial as soon as my cash flow allows!

Hi Mike,

When you pay for a business expense from your personal funds, you are lending the money to the business who is then purchasing the goods or services. That is, the business incurs the expense when you pay for it, not when the business reimburses you. Therefore, the VAT Treatment would normally be 'Purchase of Goods or Services from UK Supplier' at the time of the initial purchase. The reimbursement is just paying off a loan - this is outside the scope of VAT, so can be recorded as a General Transaction.

If you have already submitted your VAT return for a previous period when you should have reclaimed the VAT on a purchase, you will need to manually adjust your next VAT return to include this amount.

Regards,

Thanks Mark - that has really helped!

You're welcome! Let us know if you have any other questions.