Just a quick logic issue before disagreeing with the principle.
For your own business why are you thinking about discounting when accounting / bookkeeping fee's are an expense of the business anyway?
With other clients the accounting expense is on their books. With your business both the accounting expense and the fee's charged are on the same P&L.
Right, basics concepts aside. Now the more fundamental issues
You are looking to recognise revenue that you will never receive in order to window dress your financial statements to make the top line seem better than it really is whilst expensing the entire amount so incurring no associated tax liability.
The definition of revenue is : the gross inflow of economic benefits (cash, receivables, other assets) arising from the ordinary operating activities of an entity.
Where is the inflow of economic benefits in doing your own books for free? To cash has changed hands, there are no receivables, there is no exchange of other assets.
Just think of an extreme example. You charge yourself £20,000 for the bookkeeping then write off through expenses. Suddenly you are a £20k turnover business although you have actually received nothing.
There is no business rational to inclusion of this transaction so to include it can be for window dressing purposes only.
__________________
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.
My thoughts were not dressing up my turnover at all.
But more about writing off say £350 a year in profit.
If I charge my own business £350 a year for bookkeeping (and I'm referring to my bookkeeping business when it's started) then as a discount I must surely write the £350 off so my profit would then be reduced as I'm not receiving any payment.
An imteresting thought. Its not a 'thought' it basic accounting concepts, rules and regs.
My thoughts were not dressing up my turnover at all. but thats what would happen if you did it
But more about writing off say £350 a year in profit. There are also rules regarding 'write off' - in the event of an HMRC inspection - how would you justify it/how did you justify the write off for your friend/did you receive some other 'benefit' from him - eg did he do some work for you that he didnt charge for?
If I charge my own business £350 a year for bookkeeping (and I'm referring to my bookkeeping business when it's started) then as a discount I must surely write the £350 off so my profit would then be reduced as I'm not receiving any payment. So are you 'discounting' or 'writing off'? Youve interchanged the two. Write it out and see what impact there is. Then review the rules that govern accounting and then come back to the debate perhaps. Also - when you say charge your own book-keeping business - just to clarify - is this 'limited' are you going to charge it personally? Sounds like a can of worms to me.
Just some random thoughts! I think you perhaps need to re-review Shaun's comments
Edited as I typed booking business instead of bookkeeping business
-- Edited by Cheshire on Sunday 28th of June 2015 12:26:08 PM
-- Edited by Cheshire on Sunday 28th of June 2015 02:21:36 PM
__________________
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
Other than the window dressing Shaun mentioned (and I understand you raised the issue for debate rather than an intention) what would be the point in doing it?
Nothing has happened on your books profit wise, so to me at least, it seems totally pointless.
You wouldn't be writing off £350 profit because the profit wasn't there in the first place. All that's happened is you've artificially increased your turnover to create that "profit" which you then expense.
-- Edited by Leger on Sunday 28th of June 2015 12:04:49 PM
__________________
John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
But read the first part of my reply again. (before we went on to discuss window dressing which to me as an ex banker is the main issue (and sure the other one of us will be along soon!))
What profit?
You have an expense for the amount that you would have coming in in fee's.
What are you writing off.
Maybe if you saw this in pictoral form.
You have a fee of £400 for accountancy fee's.
Gross profit £400, Net profit £0
There is no profit if the accountancy fee's are done by yourself, for yourself so what are you discounting? If you did you would end up with a contrived loss.
__________________
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.
glad to see that I'm not the only one horrified by this suggestion.
I knew that you would home in on this one Jo. It's in our DNA.
In my first reply last night I was thinking about you and my last line was going to read "Release the Kraken" but then I thought, no, that wouldn't fit if you didn't reply immediately afterwards.
John, we completely concur. I tried to seperate out the two points in my message last night but probably didn't do too good a job of it. I was attempting to redress that with this mornings post (which I hope doesn't detract from the issue of the book cookery aspect).
__________________
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 morning Shaun
Oh Ive toned down my reply and tried to question some simplistic ideas - probably not worded very well in the end as it got chopped and changed about. One example perhaps from over Overpudlian friends as Vince would say....
Over inflate turnover = prison sentence if the SEC gets their hands on it (and such has just happened to one man recently!). By the way for those who dont know the SEC = the Securities and Exchange Commission who monitor the US equivalent of PLCs. Just to make it clear - small one man bands and SMEs have to abide by the same Accounting Concepts as PLCs (subject to one or two bits of course) in the UK as well as the USA.
Morning John!
__________________
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
Morning Shaun Not so much horrified as scratching my head and thinking why? I've never charged myself to do my own bookkeeping and it's never entered my head to do so.
I thought your diagram emphasised the point quite well.
Jo also raised the discount element. If you (say) give a discount of 50% to a friend that could also excite the tax inspector. Have you received some benefit from them in return? Both should charge each other even if it ends up being contra'd
__________________
John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
when I was writing my original reply last night it went through a couple of adaptions, mainly to take stuff out.
At one stage I started detailing the results of RBS vs Bannerman. Johnston, Maclay and others (2002) which although used more often in relation to audit and exemption clauses to my mind is applicable here where over inflated turnover resulted in two years in Jail.
I don't think that many people appreciate that if one seeks finance the banks have some of the best legal minds on payroll who will seek the maximum penalty if a bank loses money due to dodgy accounting.
I do feel sorry for the guy in the Bannerman case as it was a relative junior member of staff who got thrown under the bus.
At least in the US you get a free orange jump suit.
__________________
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.
Although Im just debating with myself about Shaun calling me the Kracken! A legendary sea monster. Monster = not good, as Im lovely but.... Legendary = ok.
Kraken is the definite form of krake, a word designating an unhealthy animal or something twisted (cognate with the English crook and crank). I think Shaun is skating on thin ice here.
In modern German, Krake (plural and declined singular: Kraken) means octopus, but can also refer to the legendary Kraken. Hmmm
In Dutch, the verb Kraken means breaking or the sound of cracking. Yes you might hear some bones been broken!
__________________
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
when I was writing my original reply last night it went through a couple of adaptions, mainly to take stuff out.
At one stage I started detailing the results of RBS vs Bannerman. Johnston, Maclay and others (2002) which although used more often in relation to audit and exemption clauses to my mind is applicable here where over inflated turnover resulted in two years in Jail.
I don't think that many people appreciate that if one seeks finance the banks have some of the best legal minds on payroll who will seek the maximum penalty if a bank loses money due to dodgy accounting.
I do feel sorry for the guy in the Bannerman case as it was a relative junior member of staff who got thrown under the bus. Dont they always!
At least in the US you get a free orange jump suit. lol
__________________
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
I was thinking of it more in Pirates of the Caribean terms. i.e. a weapon of ultimate power that once released would not return until the object of its attentions had been destroyed utterly.
Just to clarify I was referring to your power to cut through the crap with the written word rather than any physical attribute.
Should I stop digging now, lol.
__________________
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.
Although Im just debating with myself about Shaun calling me the Kracken! A legendary sea monster. Monster = not good, as Im lovely but.... Legendary = ok.
Kraken is the definite form of krake, a word designating an unhealthy animal or something twisted (cognate with the English crook and crank). I think Shaun is skating on thin ice here.
In modern German, Krake (plural and declined singular: Kraken) means octopus, but can also refer to the legendary Kraken. Hmmm
In Dutch, the verb Kraken means breaking or the sound of cracking. Yes you might hear some bones been broken!
Hahahahahahha Oh dear Shaun, you've certainly opened up a can of worms now haven't you lol. Perhaps Shaun was thinking of the irish version, and thought you were kraken
__________________
John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
Leger wrote:Perhaps Shaun was thinking of the irish version, and thought you were kraken
Yes, yes... Lets go with that one!!!!!
(Cheers John, I owe you beer!)
__________________
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.
An imteresting thought. Its not a 'thought' it basic accounting concepts, rules and regs.
My thoughts were not dressing up my turnover at all. but thats what would happen if you did it
But more about writing off say £350 a year in profit. There are also rules regarding 'write off' - in the event of an HMRC inspection - how would you justify it/how did you justify the write off for your friend/did you receive some other 'benefit' from him - eg did he do some work for you that he didnt charge for?
If I charge my own business £350 a year for bookkeeping (and I'm referring to my bookkeeping business when it's started) then as a discount I must surely write the £350 off so my profit would then be reduced as I'm not receiving any payment. So are you 'discounting' or 'writing off'? Youve interchanged the two. Write it out and see what impact there is. Then review the rules that govern accounting and then come back to the debate perhaps. Also - when you say charge your own book-keeping business - just to clarify - is this 'limited' are you going to charge it personally? Sounds like a can of worms to me.
Just some random thoughts! I think you perhaps need to re-review Shaun's comments
Edited as I typed booking business instead of bookkeeping business
-- Edited by Cheshire on Sunday 28th of June 2015 12:26:08 PM
I never wrote anything off.
I never charged in the first place as I was doing it as a favour whilst learning and training.
Once I had qualified though I had explained that I would charge her for the services provided. Her husband is a car mechanic and he has always fixed my car for free. So the write off would of been against the car repairs bill.
I never charged in the first place as I was doing it as a favour whilst learning and training.
Once I had qualified though I had explained that I would charge her for the services provided. Her husband is a car mechanic and he has always fixed my car for free. So the write off would of been against the car repairs bill.
Thats not a write off.
You have traded services for services, those services have a value, the value of the car service (which you have set at the value of your bookkeeping service) is included in the accounts as fee's which will go towards your profit.
Remember the definition of revenue that I stated last night?
Revenue : the gross inflow of economic benefits (cash, receivables, other assets) arising from the ordinary operating activities of an entity
Your definition is thinking only in terms of cash as being revenue which is wrong.
__________________
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.
An imteresting thought. Its not a 'thought' it basic accounting concepts, rules and regs.
My thoughts were not dressing up my turnover at all. but thats what would happen if you did it
But more about writing off say £350 a year in profit. There are also rules regarding 'write off' - in the event of an HMRC inspection - how would you justify it/how did you justify the write off for your friend/did you receive some other 'benefit' from him - eg did he do some work for you that he didnt charge for?
If I charge my own business £350 a year for bookkeeping (and I'm referring to my bookkeeping business when it's started) then as a discount I must surely write the £350 off so my profit would then be reduced as I'm not receiving any payment. So are you 'discounting' or 'writing off'? Youve interchanged the two. Write it out and see what impact there is. Then review the rules that govern accounting and then come back to the debate perhaps. Also - when you say charge your own book-keeping business - just to clarify - is this 'limited' are you going to charge it personally? Sounds like a can of worms to me.
Just some random thoughts! I think you perhaps need to re-review Shaun's comments
Edited as I typed booking business instead of bookkeeping business
-- Edited by Cheshire on Sunday 28th of June 2015 12:26:08 PM
I never wrote anything off.
I never charged in the first place as I was doing it as a favour whilst learning and training.
Once I had qualified though I had explained that I would charge her for the services provided. Her husband is a car mechanic and he has always fixed my car for free. So the write off would of been against the car repairs bill.
I think perhaps you should have a read up of the laws and tax implications of 'Barter' system
__________________
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
Not so much horrified as scratching my head and thinking why? I've never charged myself to do my own bookkeeping and it's never entered my head to do so. 
