I had a quick query regarding accounting under the cash basis form of accounting.
My accounting period is from 1st april 2015 to the following 1st april 2016 (its been between these dates since i started trading in 2013)
I purchased some bulk stock on 03/19/2015 and money was paid on this date to suppliers
But i did not declare / account for this stock as an expense on my 14/15 tax return instead i personally chose to account / declare as an expense in the following 2015/16 tax year
so my question is, is there anything wrong with me doing this?
I chose not to as i felt that the stock although it wasbought in the 14/15 accounting period, the majority of it was sold in the following accounting period -> 1st april 2015/16 hence why i chose to declare in this period than the period it was bought in?
please can someone give me some insight, i would really appreicate this.
Thanks
-- Edited by kj90 on Saturday 8th of April 2017 12:25:54 AM
-- Edited by kj90 on Saturday 8th of April 2017 12:36:43 AM
-- Edited by kj90 on Saturday 8th of April 2017 12:37:37 AM
-- Edited by kj90 on Saturday 8th of April 2017 03:05:12 AM
Income and expenditure should be accounted for in the period to which it relates. Your financial statements will not reflect the true state of your finanial affairs in that expenses are understated in the first period meaning that profit would be overstated (you do not state that no sales took place in the first year). If the accounts were used as the basis of obtaining finance this is actually fraud.
Is not the reality of the question asked that you made a loss in 14/15 and a profit in 15/16 for which the brought forwards losses can be offset.
Now, answering the question that you probably intended to ask, from the other information given, you state that you didn't start trading until mid 15/16. Therefore stock purchased pre trading (in 13/14) is treated as having been purchased on the first day of trading rather than at the date of purchase.... Bet you're wishing that I had led with that one rather than mentioning fraud in the first line! :)
There you go, theory vs practice, totally different answers.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Income and expenditure should be accounted for in the period to which it relates. Your financial statements will not reflect the true state of your finanial affairs in that expenses are understated in the first period meaning that profit would be overstated (you do not state that no sales took place in the first year). If the accounts were used as the basis of obtaining finance this is actually fraud.
Is not the reality of the question asked that you made a loss in 14/15 and a profit in 15/16 for which the brought forwards losses can be offset.
Now, answering the question that you probably intended to ask, from the other information given, you state that you didn't start trading until mid 15/16. Therefore stock purchased pre trading (in 13/14) is treated as having been purchased on the first day of trading rather than at the date of purchase.... Bet you're wishing that I had led with that one rather than mentioning fraud in the first line! :)
There you go, theory vs practice, totally different answers.
Hi thanks for your response.
Im a small soletrader under the cash basis form of accounting. I didnt really understand the answer youve given, im really sorry if im being ignorant.
Income and expenditure should be accounted for in the period to which it relates. Your financial statements will not reflect the true state of your finanial affairs in that expenses are understated in the first period meaning that profit would be overstated (you do not state that no sales took place in the first year). If the accounts were used as the basis of obtaining finance this is actually fraud.
Is not the reality of the question asked that you made a loss in 14/15 and a profit in 15/16 for which the brought forwards losses can be offset.
Now, answering the question that you probably intended to ask, from the other information given, you state that you didn't start trading until mid 15/16. Therefore stock purchased pre trading (in 13/14) is treated as having been purchased on the first day of trading rather than at the date of purchase.... Bet you're wishing that I had led with that one rather than mentioning fraud in the first line! :)
There you go, theory vs practice, totally different answers.
I think you may have misunderstood my question and/or got the dates wrong.
Yes there is something wrong with the way you have accounted for this, you can not just swap and change accounting concepts to suit yourself for every transaction just because it benefits you, so now you have 2 deliberately incorrect tax returns.
Maybe with a bit more thought and planning you could have held back on the purchase for a couple of weeks and then it would have been recognised in the year you wanted it to.
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Doug
These are only my opinions of how I see things and therefore should not be taken as advice
Income and expenditure should be accounted for in the period to which it relates. Your financial statements will not reflect the true state of your finanial affairs in that expenses are understated in the first period meaning that profit would be overstated (you do not state that no sales took place in the first year). If the accounts were used as the basis of obtaining finance this is actually fraud.
Is not the reality of the question asked that you made a loss in 14/15 and a profit in 15/16 for which the brought forwards losses can be offset.
Now, answering the question that you probably intended to ask, from the other information given, you state that you didn't start trading until mid 15/16. Therefore stock purchased pre trading (in 13/14) is treated as having been purchased on the first day of trading rather than at the date of purchase.... Bet you're wishing that I had led with that one rather than mentioning fraud in the first line! :)
There you go, theory vs practice, totally different answers.
I think you may have misunderstood my question and/or got the dates wrong.
That would be because you completely changed the wording of the question after I answered it.
I answered the question asked and in the original that existed at time of my response you clearly stated that you started trading in 15/16.
Your question implies that you approach your bookkeeping with the same cavalier disregard that you evidence with your adjusting your own question then questioning the technical ability of those of us who responded to it.
What you are doing is fundamentally incorrect, it ignores basic accounting concepts, in certain circumstances may be considered fraud, and as stated by Johnny carries with it financial penalties.
Also as stated by Johnny (you beat Joanne to it this time Johnny ), you are on the wrong site as people here will respond with accounting concepts and legal precedent, you might want to try something like UKBusinessForums where I'm sure that you will find lots of people willing to tell you what you want to hear in a simpler manner... Just ensure that youu get a good accountant behind you who would not take their knowledge base from such sites.
Morning Johnny, Morning Douglas
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
I think you may have misunderstood my question and/or got the dates wrong.
Hilarious!
Typical business owner, comes on for advice then accuses the professionals of getting it wrong. They always have a dig or a moan don't they when they are told something they don't like! (Apart from the only one ever, one a few weeks ago, who was so apologetic about asking her question, after being informed she had strayed onto a professionals site!)
Not only that but this OP picks on a Chartered Accountant.....of course ignoring the 10 years of studying the subject to get the proper knowledge.....as opposed to someone who 'chooses' to do something within their accounts and tax returns which goes against the rules and law.
Then the OP changes the post a good couple of hours later when realising it as indeed them that got it wrong. Never mind the shouty styled use of bold letters (as if we cannot read!) and date issue that Vince mentions.
lol on referring them to the UKBF- they can get the equivalent of getting advice from their drunk mates from down the pub, oh it's ok your honour, my mates said it is ok so it must be true, they all got away with it for a few years too. Nice one on the penalties when they do catch up.
I've seen my learned colleagues on another of our favourite sites saying to such posters - stop being a freeloader and get some proper advice so you get it right. You asking on here is the equivalent of me having a pile of your stock for free. Except selling stock is easy, anyone can do it. But in this game a little knowledge is bloody dangerous!!! So you really should get an Accountant, that relatively small expense and by taking that advice will actually save you some money in the long run. Might even save your personal assets!!
I think I might just try out that new improved fraud reporting process that HMRC told us about a couple of days ago.
__________________
Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
Hi guys,
im very sorry if i offended anyone, i didnt mean to write it in this way, sorry for my ignoarnce. im a newbie to accounting concepts, and wholly trust the professionals.
It was just a question that i wanted to know the answer to.
I do understand that now i have underdeclared an expense in one tax year and now have overdelacred an expense in the following tax year.
I will have to amend this, this wasnt inetentional. I just made a mistake.
), you are on the wrong site as people here will respond with accounting concepts and legal precedent, you might want to try something like UKBusinessForums where I'm sure that you will find lots of people willing to tell you what you want to hear in a simpler manner... Just ensure that youu get a good accountant behind you who would not take their knowledge base from such sites.
