If you are obliged to double-entry bookkeeping, you will likely be confronted with the term split entry again and again . In the case of split bookings, also called split bookings, invoice amounts are split or split and this is done on different accounts in debit or credit. A split booking can be very useful in your accounting. Especially when it comes to invoices that contain multiple items. In this article you will find out what exactly split bookings are and how you can make such a booking.
What is a split booking?
The Split book you’ll find only in the double-entry bookkeeping . This booking enables you to split an invoice amount between different accounts. This means that you can assign an invoice that contains several different products to the corresponding categories. By definition, the split booking is a booking that gives you a better overview of your debit and credit accounts .
With the split booking you simply create order in your accounting . Correct bookkeeping that does not contain any errors does not entail any expensive consequences for the tax office.
When do you need to make a split booking?
In almost every company there are always bookings for which it makes sense to make a split booking. For example, it is useful for you to split an invoice if it contains different tax rates . Splitting a booking also means that you can more easily separate professional and private expenses. Below you can see the most common and also the most sensible reasons for split bookings and their implementation:
- if there are different tax rates on your receipts
- if your invoice concerns several categories (e.g. for different products)
- necessary for costs and revenues
- for the separation of professional and private expenses
- for invoices with a discount
- Allocation for simultaneous incoming and outgoing payments
In these examples, it makes a lot of sense if you can split the booking . How exactly this is done with these examples and why you will find out in the following sections.
Receipts with different tax rates
In business life it is quite common that you receive invoices with different tax rates . Take the example of a business trip. You have an appointment with a business partner that lasts several days and you have to stay in a hotel during this appointment. You will find a tax rate of 7% on your invoice for this overnight stay. If you want breakfast in addition to your overnight stay, this will be taxed at 19% on your bill. A split booking creates a much better overview for you when it comes to sales tax.
Invoice with different categories
An invoice with different categories such as different products is probably the most common reason for a split booking. To make this easier to understand, you have to imagine the following example. You shop for your office and the employees who work there. New toilet paper is needed and the coffee is running out. In addition, you hired two new employees and bought two desks for these. When posting this invoice, you now want to split it into the accounts for general operating costs, other operating requirements and office equipment.
Split booking for costs and revenues
Not very often, but it is quite possible that you will find both revenues and costs on one invoice . This is possible, for example, in the event that a customer of yours is also your supplier at the same time .
Separation of personal and business expenses
Let’s stay with the example already mentioned above. You buy new toilet paper for your office and your employees. Coffee is also bought, but not for the office, but for you at home. So business expenses and personal expenses are mixed up on the bill . With a booking that you split, you can separate everything nicely and assign it to the respective accounts for correct accounting .
Invoice with discount
In the case of an invoice with a discount, you have a gross amount listed there, which is indicated as an open item . Your customer will immediately transfer the invoice to your company account in order to secure the discount granted. For this, the invoice amount is reduced by the amount of the discount. However, you now have the task of correctly entering this difference in your accounting . To do this, you need a split booking. This allows you to correctly post the clearing of the open item, the expense of the discount and the receipt of the payment with the sales tax correction all at once.
Simultaneous incoming and outgoing payments
You will always have simultaneous incoming payments and simultaneous outgoing payments in debit and credit. However, you don’t have to make individual bookings for each cost type . Instead, you post the cost types with the input tax code on the side in the debit and the total amount of the invoice in the corresponding account in the credit.
Post split booking correctly
If you make a split posting, several debit and credit amounts are posted at the same time. If you want to split a booking, you are pursuing the goal of correctly assigning a booking to several categories . As in our examples above, these can be general operating costs, office equipment, etc. If you now want to split an invoice, you do not have to enter each cost type separately. You only need to have the correct input tax code for the corresponding cost types and you can post these in debit and the total amount of the invoice on the respective account in credit.
In general, a split booking with an accounting software would look like this:
- Income and expenditure
- Postings in debit and credit
- Date, entry of document number, booking text
- Enter the total amount
- Choice of financial account and contra account
- Click on the Split booking button
Split booking example
To illustrate a split booking in more detail, we will use the well-known example. You buy coffee and toilet paper for your office and your employees. You have also hired two new employees, whom you also bought a desk at the same time. You bought everything at once in the wholesale market and all items are on one bill. The split booking would now look like this:
- Desks: split to the operating or office equipment account
- Coffee: split to account for other business needs
- Toilet paper: split to account for general operating costs
A split booking is used for double entry bookkeeping. The split booking is used to make it easier to split bills that contain different items. In addition, the individual amounts can be assigned to the respective accounts much easier and better. For this reason, the term split posting is also used here very often . However, the split booking is a very time-consuming and error-prone activity if it has to be done manually. This is much easier with accounting software and is definitely recommended for companies of all sizes, since a split booking is necessary in many cases.