Normally I put companies websites down as advertising and PR.
I've recently picked up a web hosting company and I can't help think that the web hosting should be a cost of sales rather than an expense for that sort of business.
The previous accountant expensed it but for this sort of business that doesn't sound right to me.
Any views?
all the best,
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.
Darn it, you deleted too fast for me to catch it Kris.
I'm definitely going towards Cost of Sales on this.
Its still sitting in the accounts as an expense at the moment but it's nothing to move it up a bit once I've finished all the other input for this set of accounts.
For the amounts involved its immaterial. Its just one of those things that niggles in that there is arguement with this one for either side of the line and like yourself, I don't like niggles. I want black and white not shades of grey when it comes to recording data.
Hope that your having a good day matey.
all the best,
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 do stuff for web and social media companies. With the exception of costs incurred for their own website/social media activities I code it as Cost of Sales.
that was my way of thinking too but at this time of year with the old grey matter absolutely fried its always better to get confirmation.
Many thanks,
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'm with you on this one, it is their product, so cost of sales would seem a reasonable place for it to be. It's not really an overhead.
Interesting you should talk about the materiality, I was told on another forum today that materiality was an auditing concept and not an accounting concept!!
The retort that I would give on the other forum would be in relation to the obvious one of capital expenditure in determining whether to capitalise or expense which is down to the materialarity of the asset.
From the audit perspective materialarity is different in that its setting the level below which the auditor is not interested in irtems either individually or in agregate. They have different sorts of materialarity including financial statement materialarity, performance materialarity and component materialarity.
The generally accepted values are :
0.5% to 1% of turnover
1% to 2% of total assets
5% to 10% of pre tax profit
Anything below the lower value being immaterial, anything above the upper value being material. anything between being a judgement call.
Thats looking at materialarity differently to how we use it in determining whether an amount is worth (for example) capitalising. Or in this instance worth making a song and dance about whether its an expense or cost of sales (although I have anyway as I'm a bit of a perfectionist).
Also, as audit is simply a sub area of accounting (as are bookkeeping and insolvency) they're all really accounting concepts.
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.
Oh rest assured suitable replies have been issued.
It just raises that interesting bookkeeper/accountant question again though. I would have thought that in the main, accountancy concepts like materiality, prudence, business entity, matching, consistency, duality and historic cost would be bread and butter things for bookkeepers to know.
Totally agree. They should along with the accounting equation and Substance over form. (Shame that prudence was dropped (although I can't think of that word now without thinking of the budget drinking games that we used to have on budget day at the bank with old Gordon as Chancellor)).
I remember many (many, many) moons ago doing a bookkeeping course with the Open University as if you wanted to study accountancy you had to first understand bookkeeping.
All of the basic accounting concepts and the accounting equation were taught as part of the bookkeeping then repeated in the accounting studies (They were considered that important).
I think that in many ways one can consider bookkeeping as the foundations of accountancy and the accounting concepts are the metal supports concreted into the foundations to give it all stability.
Shaun.
p.s. Go on, gizza link. I need a laugh.
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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.
good read... My God, you're turning into me over there, lol.
On the Asset definition, IAS16 states :
The cost of an item of property, plant and equipment shall be recognised as an asset if, and only if: (a) it is probable that future economic benefits associated with the item will flow to the entity; and (b) the cost of the item can be measured reliably.
So under international standards future economic benefits is still in there.
Under UK GAAP per FRS15 the definition is :
Assets that have physical substance and are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes on a continuing basis in the reporting entitys activities.
As we are slowly moving to IFRS (or not so slowly now that FRS102 is being implemented) my belief is that the move is going to be to future economic benefits. When I get chance (after the end of this month) I'm going to have a dig around FRS100, 101 and 102 which are supposed to be the biggest shakeup of UK standards in a generation so I'm confused as to why there isn't more being asked about the changes that are on the horizon.
My understanding is that UK standards are basically moving to international in all but name (and hopefully the necessity to produce Cashflow statements although such are much simpler under IFRS).
Maybe we should start an FRS102 thread?
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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.
I would allocate the hosting costs which relate to clients as COGS, and put their own hosting fees to "Computer and web costs" down in admin :)
Helloooo Foxy....
Cheers me darlin.
Trust you to come up with an answer that basically says both, lol.
Cheers babe. If I can seperate the two I will.
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.
I have a similar client, and the hosting invoices include a breakdown of the domains being hosted. I imagine the client's hosting costs would be immaterial in the grand scheme of things, should you not be able to separate.
It would depend on the type of hosting really. For example I host a number of websites on a virtual private server. It would be very difficult to extract the cost of my website from the others hosted.
-- Edited by kjmcculloch83 on Monday 13th of January 2014 12:31:37 PM
In case you want another opinion, when I first read the question I thought the same answer as Michelle has given but if couldn't separate it out I would put it all in COGS.
I have a similar client... COGS for me! They cant get the sales without the hosting, so its the same a shop buying stock as far as im concerned... :D (my two pennys)
And the over familiarity is bit much isn't it... "cheers me darlin" and "cheers babe" shaun... you feeling ok?! lol
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.
