As a general principle, the accounting treatment of a transaction is determined by whether the activity is the selling unit’s primary purpose – that is, a core activity that the unit undertakes, for example, IT Services providing computer equipment and software. This would also be true for staff costs (e.g. a solicitor is part of Legal Services according to the University payroll but his or her time is charged to another department for specific work). Activity may also be classified as a non-primary or ‘secondary’ purpose (e.g. recharging of office space or photocopier usage).
Based on this principle:
- where the activity is the selling unit’s primary purpose, the credit should be posted to income; and
- where the trade is non-primary purpose, the credit should be posted against the original expense.
Coding internal trade transactions
The selling department will have three options for how to code the credit/income, depending on whether the activity is the selling unit’s primary purpose:
- Primary purpose - the credit should be coded to the “Internal Recharges (Sales) 48500” income code.
- Non-primary purposes, specific costs - the credit is netted off the original expenditure.
- Non-primary purpose, apportioned costs – if costs are to be apportioned, the “Expenditure Recharges” (99600) expenditure code should be used.
For the buying department, the debit will be charged to the most appropriate cost code.
Adjustments/corrections and project re-coding
If you need to re-code a transaction due to miscoding, recharges of costs to a trust fund or recoding to a project, you should not automatically use Activity 33 to do so. You should match to the same code that was used for the original transaction and only amend the element that needs to be changed.
Estate Services transactions
For all recharges from Estate Services, unless regular and specific (e.g. telecommunications or utilities), departments should use the “Expenditure Recharges UED” (99610) expenditure line. This will also include departmental contributions to Estates-led projects. Activity 33 should be used.
Where goods or services ae bought externally and recharged/sold internally, the external purchase should code to Activity 00. The onward internal transaction should charge to Activity 33.
The VAT on the external purchase should take into account the intended use of the final recipient department wherever possible.