Hi all...I seem to be full of questions lately, instead of answering them!
I have a client (The Beauty School one) who has recently set up a salon which is independent of the main Beauty School. She has spent some money in buying stock, equipment and furniture etc for the salon and was wondering if she can capitalise the whole lot, instead of just the obvious such as expensive couches/equipment etc. She only rents the salon from the premises below, she doesn't own it.
Many thanks, but the business has been set up for a number of years, the salon that she has opened is a sideline of the existing business. She rents a premises that is remote from the existing business and has bought equipment and stock for use in the salon. They are not pre-company formation expenses, rather expenses used in the continuation of the business, but as a sideline. She was looking to capitalise the entire set up costs rather than just the expensive furniture etc that would normally be capitalised anyway.
Many thanks, but the business has been set up for a number of years, the salon that she has opened is a sideline of the existing business. She rents a premises that is remote from the existing business and has bought equipment and stock for use in the salon. They are not pre-company formation expenses, rather expenses used in the continuation of the business, but as a sideline. She was looking to capitalise the entire set up costs rather than just the expensive furniture etc that would normally be capitalised anyway.
Basically, these are pre-trading expenses which are treated as though they were incurred on the day that the new business is deemed to have commenced.
So what i understand is, the new saloon is opened as a part of an existing business i.e., a individual department.
So Basically what you are doing is to create a new department which is an part of existing business and post all the costs to that department. Coming back to your question, if the costs has not been capitalised in the business yet, then you can capitilaise it now.
In short, yes all these costs can be captilised to the new department(which is saloon) if its not already been captilaised in the parent company (which is Beauty School One).
Oh Wait!! Is the saloon a part of the existing business or is it a new sole trade business.
In either cases you can captilaise it. If it is an extension to the existing business you post it on the business account with appropriate departmental codes. If it is a sole trade business, then you simply post it to new sole trade business.
Is this confusing?
Feel free to drop me a line if you need further assitance. Please mention the relationship with the saloon and the beauty school. Are they both gonna trade under a single company name (if this is the case then treat the saloon as a department of beauty school) or is the saloon going to be a new sole trade business.
Yes, the salon is part of the existing Limited Company business and will be trading under the Limited Company umbrella, not a sole trader business. So I will go ahead and capitalise all these costs then.
Oh and Naveen, it's Salon, not Saloon... A Saloon is something completely different...wouldn't want anyone to think we were selling alchohol...lol
