I'm currently waiting for my ICB level 3 computerised assignment to be marked and from reading around the forum I see I'm not the only one to have been frustrated by the ambiguity of some of the questions. It seems I did similarly to others in that I explained every assumption I had to make, so fingers crossed I made the right decisions.
But I wondered if anyone with ICB experience has any pointers on what they are usually expecting?
For instance when milk for staff has been included in the books, my dilemma was that leaving it in there is wrong, I didn't want to just put it to the partners' current accounts but posting it to a suspense account when it then has to be left in the year end accounts didn't seem right either.
Milk for staff, providing that it is available to all staff, is an allowable expense of the business as is Tea, Coffee, Sugar, drinking water. These should be included in the books.
cheers,
Shaun.
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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.
Thanks for clarifying that for me, I've had a good read through the relevant HMRC information and it's very clear that refreshments are an allowable expense, as you say. Yet my text book says its a personal expense and so not allowable!
Milk would not be allowable if it was available only to some staff or indeed only to management.
Is that perhaps the situation in the text book?
If not then it seems one of those cases where the text book is wrong (as you've seen from the HMRC website).
Is it a training provider text or a generally published book (such as woods & Sangster books) or the text of one of the accounting bodies (Such as would be supplied by BPP or KAPLAN publishing?).
If generally available let us know which text it is as I may have a copy and wouldn't mind having a read to see what they're trying to say.
If it isn't a generally available text then you might want to talk with your course tutor about it as it does seem to be a genuine error in their text.
Talk soon,
Shaun.
__________________
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.
It's David Cox's Business Accounts, 2nd edition. I thought it was still the most current edition, but I've just checked again and see it isn't, so maybe it's been addressed in the 3rd edition.
If you want to try to find it, it's on p118 (petty cash chapter).
Assuming that it's Wyvern Engineering that your looking at.
Mine's the third edition and it's similar but now uses tea and coffee rather than milk.
This instance is different to what Bill and myself were talking about but it's not very well explained in the text.
What's happening in this instance is that it seems that an employee has purchased the refreshments for their own consumption at work and is attempting to claim the money back through petty cash. That's not a legitimate expense unless such was purchased for the consumption of clients.
Where it is a legitimate expense is where the refreshments are supplied by management for the use of all employee's. (Which is what Bill and myself thought was the situation).
I think that David could have done a better job of explaining that in his book. I can understand the angle that he's coming from but it confuses the reader rather than adds to understanding due to the way that if this had been paid in a different way it would have been an allowable expense.
I'll drop Osbourne books a letter later today and see if they will get it fixed for the next edition.
Told you that I had a lot of books (8 billy bookcases full! (Thank you for reinforced shelves Ikea)).
Kind regards,
Shaun.
__________________
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've had another look and I think it's the phrase 'for use in the office' that led to me assuming that it was refering to milk bought for general use in the office, it hadn't occured to me that the issue was that one person had gone out to buy their own refreshments.
I've contacted Osbourne about this. Here's a copy of my letter.
Hello,
my comment relates to
Business Accounts. 2nd & 3rd edition.
ISBN 1 872962 63 7 & prior version.
Page 118 (in both editions).
Whilst this is an otherwise excellent text the section on Petty Cash has caused confusion amongst students in relation to the treatment of milk / tea / coffee which is shown as a personal expense.
I appreciate fully where David is coming from on this as the employee has purchased the items for personal consumption. However, could I suggest an addendum in the next edition please that tells students that if such had been supplied by management for the use of all staff then refreshments of this nature would in fact have been an allowable expense.
For reference to the thread in question, can I refer you to http://www.activeboard.com/forum.spark?aBID=106474&p=3&topicID=35140401 my userid is Shamus, I am an ACCA finalist and give free technical advice and support to new starters in our profession.
Davids book is one that I recommend even to non AAT students and I will continue to despite this area of minor confusion.
many thanks for your time and consideration. I look forwards to your prompt reply for the sites readers.
I'll let you know what they have to say when I get a reply.
-- Edited by Shamus on Friday 9th of April 2010 01:43:55 PM
__________________
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.
Thank you for taking the time to highlight this issue, I am sorry to hear that it has caused some confusion amongst your students. We appreciate all constructive comments and your message has been forwarded directly to David Cox (author) and to Mike Fardon (Managing Director/Chief Editor); any comments made in reply will be forwarded to yourself. Please accept my assurance that all feedback is taken into account when planning future editions.
Furthermore, I would like to thank you for the positive comments that you made in reference to this particular text, and for your continued recommendation of it to students. Now hows that for excellent service from a publisher!
Right, so I now want everyone to go out and buy Osbourne books as a big thank you that they actually listen to their readers.
__________________
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 remember years ago our friends at hmrc tried to make all tea/coffe available to staff a benefit in kind which is why a lot of places introduced vending machines where you had to pay. Can you imagine the extra cost to business in having to do P11D's for all their staff if they ahd a drink once in a while?!
I've just received a reply message from the editor Mike Fardon, detailing the authors response to the query.
Our author has replied to your query:
"This point is covered on page 117 where the text says: 'Note that petty cash should not be used to pay for private expenses of employees, eg tea, coffee, and milk, unless the business has agreed these in advance. Usually the petty cashier will have a list of approved expenses which can be reimbursed.'"
We will certainly clarify this point in the text on reprint - thanks for pointing it out.
Osbourne is just such a great publishing house!
Hope that this has now been clarified fully.
talk soon,
Shaun.
__________________
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 wonder if you can sort the AAT out with their past simulations that invariably have errors causing people like me to spend hours trying to find out how "I" have managed to get it wrong, when in fact it turns out they have
I think, sometimes, it is very difficult to interpret exam questions, as they are not always phrased in a way which is understandable and can be misinterpreted. I know from experience that if a specific problem is found with a specific exam question moderation advice is issued as soon as the problem becomes evident in exam submissions and account is taken of different interpretations.
I think, sometimes, it is very difficult to interpret exam questions, as they are not always phrased in a way which is understandable and can be misinterpreted. I know from experience that if a specific problem is found with a specific exam question moderation advice is issued as soon as the problem becomes evident in exam submissions and account is taken of different interpretations.
In many ways, real life, is easier than exams.
In this particular case it was a simulation.
The figures they put in to the trial balance created a suspense account that you do the journals for and this then gets rid of the suspense.
Because they got the figures wrong they had the wrong amount in the suspense account and the journal entries were to amend the wrong figure, so if you did it right like me you couldn't eliminate the balance from the suspense account which was the whole purpose of the simulation.
Took me hours of researching a particular journal entry;
Could you correct a misposting in the main ledger before you extract the initial trial balance? When the purchase ledger reconciliation was carried out it was discovered that a purchase return of £2,000 (plus VAT) has been recorded on the wrong side in all of the main ledger accounts involved. Please draw up a journal dated 30 September 2004 to correct this error.
Answer being;
Dr Purchase ledger control account 4,700.00 Cr Purchases returns (2,000 x 2) 4,000.00 Cr VAT control (2,000 x 2 x 17.5%) 700.00
Being the correction of an error: purchases return incorrectly treated as purchase.
But they then knocked £4000 off the purchase ledger balance aswell making the suspense account balance £4000 less than it should of been, so when you did this;
Dr Suspense 2,500.00 Cr Administrative expenses 2,500.00 Being the overcasting of the wages and salaries account Dr Rent and rates 800.00 Cr Suspense 800.00 Being the correction of an error of single entry in the main ledger
It eliminated their wrong balance but not the correct one as it would of been if they hadn't made a big error.
Happily this is a past simulation so I didn't have to trouble over it in an exam environment.
