Bought Washing through Books for Staff who to treat in A/c

[carolinei]

Hi, so we bought a washing machine for an employee to the Value of €400.00 Power City invoiced us and we paid by bank transfer

CR Bank (1200 A/c) €400, Dr Cleaning Products N/C 7801 € 325.80, DR VAT N/C 2201 VAT.

I am struggling how to treat the wages.

So Imagine the employee is due to get €781.30 PM
Do I
CR Bank (1200 A/C) Wages €700
DR N/C 2220 €700

We will be deducting €81.30 PM and are not charging interest as per directors request
CR Bank (1220 Contra Bank) Wages €81.30 (to show monies not paid to him)
DR N/C 2220 €81.30 So this will wash out the 2220 A/C

This however will leave me with a credit of €325.20 on (€1220 Contra A/C) after 4 months - Where does that go ?

I feel I am almost there, but not quite and I just don't know how to treat it. I feel it is because we paid a supplier direct for a product so that washed out.

Any help would be great

Thanks so much

Caroline

[brucedenney]

You can not reclaim VAT on a purchase that was not for the business.

The initial purchase should have been done as T9 outside the scope of VAT

It should have gone to the nominal code for Wages as it was in lieu of wages. It was not cleaning products!

Once the payroll journal was done and you paid the person their net wages less the value of the machine including VAT, the wages control will return to zero.

I would reverse out the transaction you did and repost it correctly.