I have just started a small limited company but want to input cash funds for the company to invest in shares. Obviously the accounting extries on purchase would be:
CR Bank (B/Sheet) and DR Shares/Investments (B/Sheet).
Assuming I make a profit, upon sale presumably I would split the cash between settling the investment account and put the gain somewhere else, but a) is this balance sheet or P&L? And b) surely the gain would have to stay as B/Sheet as it's a capital gain rather than profit and hence subject to CGT thresholds??
Example - buy £300 of shares on day 1. One day 15 sell the same shares for £400, where does the extra £100 go as it can't go to the investments account as it would leave the account in CR £100 of investments (which you no longer have).
Dividends I would assume become a profit/taxable item so that would be DR Bank and CR Dividends received (P&L)
Help!?
Thanks in advance
-- Edited by Melanie on Wednesday 30th of January 2013 10:54:09 PM
Any gain on disposal of shares in other companies would be shown in the profit and loss account and subject to corporation tax. Limited Companies dont pay capital gains tax and any gains are subject to corporation tax.
Re the dividends received they get shown in the profit and loss account and off the top of my head dont think they are taxed under corporation tax.
Thank you that's a real help! Though I think dividend income is taxable (I'm no tax expert) at least partially (as it is usually assumed that a certain amount of tax 'credits' have been taken from the dividends before you receive them).
