PURCHASES ACCOUNTS REPRESENT PURCHASES FOR RESALE ONLY AND SHOULD ONLY BE USED TO RECORD PURCHASE TRANSACTIONS WHICH ARE DIRECT COSTS OF SALES.
It is important to note that these purchase accounts relate to purchases for resale ONLY i.e a direct cost (direct component) or input cost of the end sale, e.g. the purchase of Computer monitors by a Computer sales shop would be regarded as a purchase for resale.
These accounts must only be used for such items to ensure the correct classification of purchases for period end accounting in order to determine the cost of sales and Gross Profit figures. Any other purchases, e.g. kettle for the staff canteen, should be posted to the relevant expense account, e.g. Staff Canteen Expense, this is an overhead cost.
To facilitate customisation, these pre-set purchase for resale accounts are available to rename in order to specify the businesses direct costs linked to its sales activities or to group specific purchases for resale together.
There are a number of purchases for resale accounts already set up which cannot be added to or taken away from, however you may show or hide any of the accounts from view to prevent use (see 'Adding Nominal Accounts')
These include the following accounts:
Click on the Fixed Name of the purchases account which you wish to rename e.g. Purchases at Standard Rate. The fixed purchases accounts available to rename are:
Within this box type the preferred name of the purchases for resale account that will suit your particular purchases e.g. Purchase of Computer Monitors for Resale
Choose the 'Purchases account at Standard Rate' account and rename to 'Purchase of Computer Monitors'. Each time a purchase invoice is received for the purchase of computer monitors from a Supplier it should be entered against this purchase account, a VAT rate of 23% will attach (or 21% between 1st Sept 2020 and 1st March 2021). The account will now show under the user determined preferred name on the accounts and all reports.
Once a purchases account has been renamed it will automatically appear within the nominal accounts available for selection within the purchases and cheque payments transaction screens.
When using these accounts within the transaction screens the VAT is automatically processed at the corresponding VAT rate attached to the account, i.e Purchases at low rate will automatically attach a VAT rate of 13.5% to the transaction. The VAT rate attached cannot be amended.
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