Executive Proposal

Internal Fuel Accounting Control Framework & 2025–2026 Correction Plan

Background
Fuel issued to Directors' Vehicles, Station Vehicles, Generator, Fuel Tanker, Service Bay and Car Wash ("Internal Sales") has been recorded as retail sales. This overstates Revenue, Output VAT and Gross Profit while understating Operating Expenses.
Correct Accounting Treatment
Fuel and services consumed internally are not sales. They will be posted to QuickBooks as an Expense & Inventory Adjustment.
Debit Fuel Expense Account
Credit Fuel Inventory Asset
Benefits
  • No Sales Invoice
  • No Revenue Recognition
  • No Output VAT
  • Correct Inventory Reduction
  • Correct Expense Recognition
Historical Correction
The system will automatically:
  • Identify Internal Sales.
  • Cancel incorrect Sales Invoices.
  • Create matching Expense & Inventory Adjustments.
  • Reclassify Sales into Operating Expenses.
Internal Control
  • Continue using the existing interface.
  • Transactions remain visible as Internal Sales.
  • QuickBooks automatically posts them as Expenses.
  • Separate expense accounts maintained for each category of internal consumption.
Financial Impact
Before After
Revenue Overstated Revenue Correct
Output VAT Overstated VAT Correct
Expenses Understated Expenses Correct
Gross Profit Overstated Gross Profit Correct
Conclusion

The proposed framework automates the correction of historical Internal Sales and ensures all future internal fuel consumption is correctly recognized as operating expenses. This improves financial accuracy, VAT compliance and internal controls without changing day-to-day operations.
Implementation Cost KES 4,000 per Station