Its a lovely sunny day here in Wales hope it is where you are as well.
I have a new client who has just started trading as a sole trader (After school club), to enable her to set up her business she has bought a bulk pack of equipment for a lump sum of £3,000.00 which consists of over a hundred different items, I would usually treat the majority of these items as revenue expenditure if they had been bought separately but because they have been bought in one transaction I am not entirely sure whether to keep it as one package and Capitalise or to go through the whole list and work out values of each item and treat them all individually as either Capital or Revenue.
Any thoughts on how you would approach this would be greatly appreciated
Cheers.
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Doug
These are only my opinions of how I see things and therefore should not be taken as advice
Hi. I'd be inclined to capitalise and group together in the accounts to keep them tidy, keeping further information in a spreadsheet. If say it was 3000 of non-reusable art crafts I'd say revenue - will they be in use for many accounting periods?
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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.
This is the problem some of the items are most definitely revenue in nature as they will only be lasting a short period of time as in paints, paper, glues etc and others will be around for a lot longer (depending on the children) for example playstation, games and outside toys whilst others could fall into either category.
I was thinking of splitting the items and allocating to either Capital or Revenue but I am not sure of the view that HMRC would take with me actually estimating the values myself as there is no breakdown of the prices only one lump sum paid.
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Doug
These are only my opinions of how I see things and therefore should not be taken as advice
In that case I'd split too. Were they all acquired from the same supplier, could you not get a break down from them? Or were they a job lot of bankrupt stock - sort of thing?
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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.
Without any real information I'd, for the main items, search eBay for a fair value of the items, take that away from the £3000 and try to work out a fair average for the split.
Not having an accurate break down I can't see how else you'd do it.
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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 Doug
Just to throw (another) spanner in the works...
Im assuming the purchase of the £3k of items was part of the initial franchise purchase (else why oh why would you buy this lot from the franchisor - probably paid well above the odds for the bits of kit!)? if so - the detailed cost split should really be in the actual franchise agreement (at least in an annex doc).
If not, I would suggest its all revex unless its say what will be static parts of say a playground kit, because most of the stuff will be battered, bruised and not in use in 12months time - even the playstation! Ever been to a childrens after school club? Nothing Ive seen has been there and in use after 12months.
Just a thought!
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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
Thanks for the reply, the Franchise cost was broke down as the 3k (yes well over the top) being the equipment cost and the rest being the intangible asset part, this information was given to me by the Franchisee after I asked for it as there was no mention of it throughout the agreement.
Now because the club is running at a loss the client wants to sell !!!!
I knew I should have stuck to CIS.
And no never been to a childrens after school club, it was called detention in my day.
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Doug
These are only my opinions of how I see things and therefore should not be taken as advice
Thanks for the reply, the Franchise cost was broke down as the 3k (yes well over the top) being the equipment cost and the rest being the intangible asset part, this information was given to me by the Franchisee after I asked for it as there was no mention of it throughout the agreement.
Now because the club is running at a loss the client wants to sell !!!!
I knew I should have stuck to CIS.
And no never been to a childrens after school club, it was called detention in my day.
I only got detention once - Im a good girl!
My son made up for it!!!
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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
