Hi, although I qualified a few years ago, I am 6 months into being self-employed, and I am coming across a few "grey" areas. I have already posted on here, but I am still a little worried about sending info off to my client without double checking again. I have spent a long time tonight researching, but feel a lot of information is contradictory.
My client opened a salon in June, which is rented. She had to install a sink, and a counter, and signage. Am I right thinking these are capital items? If so, the client does not require a full set of accounts, so I just have an income and expenditure Summary, and I am not sure whether you need to capitalise items if the client wishes to put all costs though this year? I am so confused.
I have also got the following receipts - can these be used as revenue expenditure or care they non business expenses? (and I should not use them).
First of all, did the hairdresser commence trade in June of last year?
I'll assume this is for bookkeeping as an oppose to a tax return?
Cash or accruals basis?
The items you list are capital items. But depending upon how material the value is in the magazine stand for example, together with the pictures,could be classed as revenue. << That sentiment is often debated.
Would it not be better, going forward, to suggest proper accounts be drawn up?
-- Edited by abacus12345 on Tuesday 24th of January 2017 10:48:03 PM
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Johnny - Owner of an overly-active keyboard.
A man who can read, yet doesn't, is in no way wiser than a man who can't.
Hi I'm sorry I meant to add that prior to this she was a mobile hairdesser (but little work was done between April-June due to having a young baby, getting married, going on honeymoon etc. I am asking for tax purposes as the client is thinking in advance for the 2016/17 self assessment. We are working cash based rather than accruals. Thank you.
Hang on a minute Lorna. I did a huge response to the first part about the sink and signage and about the lease blur blur blur. So what happened to the info gathering about that?
The other stuff...first consider the definition of an asset and the definition of 'future economic benefits' from within the asset definition and there-in you have your answer, in part. Consider useful economic life. In reality how long are a bunch of pretty lights and cushions going to last for.
As I also said in my long previous response, I mentioned the need to decide on what you capitalise and what you put as revex- only you can do the calculations for any adjustments required for ongoing depreciation v capital allowances as we don't know enough about your client. you can advise her but ultimately it is her decision not yours.
Is there a specific issue with excluding any of the items from either a capes or revex inclusion! You have receipts, are they addressed to the business? Is there any evidence of the items or are you thinking she has decorated her house and put the bills through the business?
Plus, I am at a complete loss to understand why accounts are NOT required whether the items are capitalised or not. What happens if she wants to incorporate when she has grown her business to, oh what two salons, or whenever. Or if she wants a loan, mortgage or her kids what to get student finance. Besides the accounts come BEFORE the tax calc.
edited for one typo, there could be more as I've not got my glasses!!
-- Edited by Cheshire on Tuesday 24th of January 2017 11:50:31 PM
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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
Hi.
Revenue will be recognised when cash/card payment etc has been received. Expenses recognised when paid. All those items will be recognised as business expenses. Any losses can only be carried forward.
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Johnny - Owner of an overly-active keyboard.
A man who can read, yet doesn't, is in no way wiser than a man who can't.
