Donations

Trish
Trish Registered Posts: 20 Dedicated contributor ๐ŸŒŸ ๐Ÿต ๐ŸŒŸ
From time to time a client of mine will donate free Sunday lunches for two,usually to a charity. How do I handle this in their accounts as no money actually changes hands?

Hope someone can help, I would be very grateful.

Best wishes Trish

Comments

  • Bowdent
    Bowdent Registered Posts: 22 Dedicated contributor ๐ŸŒŸ ๐Ÿต ๐ŸŒŸ
    Can you clarify what business your client is in? I'm guessing perhaps a restaurant or pub.

    You don't have to actually do any postings as such if you don't want to. If you think about it, the restaurant owner paid for the food which is sat in the accounts under cost of sales. He's given it away, so you don't want to create a further charge to the accounts, else you'll double count it.

    If you wanted to illustrate an accurate GP on the face of the accounts, you'd perhaps credit cost of sales with the cost (ie not the retail value) and bring that down to the overheads under a cost of 'treating of customers' or something like that.
    T
  • deanshepherd
    deanshepherd Registered Posts: 1,809
    I suspect HMRC would rather you credited the retail value (not the cost). You can then separately consider the tax relief available on such a donation.
  • Bowdent
    Bowdent Registered Posts: 22 Dedicated contributor ๐ŸŒŸ ๐Ÿต ๐ŸŒŸ
    If the meal was had by (assuming it was a sole trader) by the owner, then it would be the retail value (within sales) that would be adjusted in the accounts with the other side being drawings.

    It's the cost element that is adjusted for treating of customers in the way the opening post describes. There is no need to consider any separate tax relief on the donation, as it's recorded in the accounts at cost, which is the correct treatment.
  • Trish
    Trish Registered Posts: 20 Dedicated contributor ๐ŸŒŸ ๐Ÿต ๐ŸŒŸ
    Donations

    Thanks for your replies Bowdent. I think I will debit sales with the retail value and credit donations. Do you think this will work?

    Trish
  • deanshepherd
    deanshepherd Registered Posts: 1,809
    There is no need to consider any separate tax relief on the donation

    HMRC may beg to differ.
  • Bowdent
    Bowdent Registered Posts: 22 Dedicated contributor ๐ŸŒŸ ๐Ÿต ๐ŸŒŸ
    Well to say I worked for a practice that specialised in the licensed trade for years and have dealt with inspectors on the matter, I'm sure it's fine.
  • Bowdent
    Bowdent Registered Posts: 22 Dedicated contributor ๐ŸŒŸ ๐Ÿต ๐ŸŒŸ
    Trish wrote: ยป
    Thanks for your replies Bowdent. I think I will debit sales with the retail value and credit donations. Do you think this will work?

    Trish

    If you are going to do the retail value, don't forget that you want to credit sales, and debit donations rather than the other way round.
  • Trish
    Trish Registered Posts: 20 Dedicated contributor ๐ŸŒŸ ๐Ÿต ๐ŸŒŸ
    Donations

    Thanks Bowdent, I kicked myself when I realised what I had said, of course it would be credit sales and debit donations.

    Thanks again for your patience with my stupidity.

    Regards Trish
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