Oil

This Overheads code records the cost of oil incurred in running the business. As an expense account, it normally carries a debit balance: debit entries increase the balance (recording new costs) and credit entries decrease it (for example, correcting an error or a refund received).

Real-world examples

Rural workshop or agricultural building

A joinery workshop or agricultural building with no mains gas connection relies on a bulk heating oil tank, topped up perhaps twice a year. A delivery of 1,000 litres invoiced at £972 (£810 net) is a debit of £810 to 7202 (Oil), a debit of £162 to 2201 (Purchase Tax Control Account), and a credit of £972 to 2100 (Creditors Control Account) — a much larger single entry than a monthly gas or electricity bill, because it covers months of heating in one delivery.

Rural hospitality

A rural pub or guest house heating a larger building and running hot water for guests draws down its oil tank faster, needing top-up deliveries several times over winter rather than twice a year. Otherwise the accounting is identical — each invoice is split between 7202 and 2201 at whatever VAT rate is actually charged. Genuinely low-volume deliveries can qualify for the reduced 5% rate under the same fuel and power rules that apply to gas and electricity, so it's worth checking each invoice rather than assuming 20%.

Commonly confused with

Because code 7201 (Gas) sits right next to this one in Overheads, it's a common mis-posting target. Code 7202 is specifically for oil, while 7201 covers gas — similar in nature, but keeping them separate is what makes the overheads section of your management accounts meaningful rather than a single lumped total.

What a mis-posting here costs you

An error posting to Oil won't change total overhead spend, but it will distort the overheads breakdown that's usually reviewed line by line each month to spot cost creep.

Other codes in Overheads