Sage - New Business starting up?

Aaron C Rescue

I am setting up Sage for my friend who is starting a new business.

He has already incurred a number of costs, though is yet to start trading, and wants his tax year to begin on 1st April 2010. Should I simply perform a Trial Balance on his Expenditure/Investment (Business Set up costs) to date, and then bring those balances forward into Sage for the new tax year?

Secondly, his Business model is on-line web sales. The web site has had a large amount of money invested in it (secure servers, online payments etc). I would like to treat the website set-up costs, running costs, and maintenance as a Direct Expense and place them in the 6000-6999 nominal range. I am correct or shoudl they be elsewhere?

Thanks in advance

Monsoon

If you've not posted anything yet to Sage, I'd bring in the pre-trading expenditure at 1st April to include it in the first financial year.

Website set up I believe is an intangible asset and I'd need to go away and read up to remind myself how they should be treated (apologies, I don't have time to do this today). However as long as you state clearly what it is in a separate nominal code, the accountant can adjust at year end.

Running costs and maintenance are fine to be in direct costs.

Aaron C Rescue

Many Thanks

Emthi

Capital Expenditure

I think you have to capitalise the website cost

Bluewednesday

Emthi wrote: »

I think you have to capitalise the website cost

It's not quite that simple, as Monsoon has already stated.

There is a whole section relating to intangible assets on the HMRC website which you will need to read up on.

I think the general rule is that it should be capitalised if there are sales generated off the website but if not it must be expensed.

You really need to check it all with the Revenue guidance though

Aaron C Rescue

Thanks for your replies.

I had a quick google to see about capitalising the website, got some interesting results. I particularly liked the one by grammargirl who lets us know that she capitalizes " every letter of the title" :-)

But seriously - I will check out HMRC and see what they have to say.

I find it quite an interesting (and valuable topic) - the 'virtual shop' - you're a shop without any physical 'stock'. I wonder if any exam questions have ever been based on a 'virtual' organisation.

Steve Collings

UITF 29 also gives you the guidance on accounting for website costs. However, Annette is correct that capitalisation should only occur if the website can generate revenues. This accords with the Statement of Principles for recognition of a fixed asset.

Best wishes
Steve