I receive a bill every 2 months for electricity which I enter as a purchase.
However, this bill is paid for by monthly instalments from my bank account.
This always leaves a balance carried forward to the next bill.
How do I correctly apply the payment from my bank account to the purchase, and how do I account for the balances carried forward on each bill ?
Just Spend Money in the amount subtracted from your bank account. Someone overly nit-picky might tell you that under accrual accounting you should record only the expense incurred and maybe even have separate accounts for amounts carried forward or backward. But I suspect these are so small as to be insignificant. Others just as nit-picky might tell you that you don’t owe money until invoiced, so it doesn’t matter anyway.
This is an example of an expense that I personally would not enter as a purchase invoice. After all, you are not buying on credit. You are paying on demand, automatically it sounds like. So don’t make it into a bigger headache than necessary.
If I do not enter a purchase invoice how would I account for the VAT ?
Everything happens the same way as with a purchase invoice, from account selection to tax codes. Using Spend Money just bypasses the intermediate phase of having the liability reside temporarily in Accounts payable.
Thanks. I’ll do it that way from now on.