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goldengolden Just JoinedRegistered Posts: 2
Please can someone give me an accurate way of calculating appropriation of expenses on income.

1st Example:
Insurance that covers a year but crosses over tax years. It cost £229 for a year payable on Feb 2nd with year end is same a tax yr on 5th of April so bill needs to be appropriated over 2 tax years. What is the calculation to show how much of the bill is due for each tax yr?

2nd Example:
Income of rent for one month of £785 from 17th of March goes into second tax yr starting on the 6th of April. What is the calculation to show how much is owed to year when it is paid and the part of the month into the second tax yr?

I have trawled through the AAT to find this calculation but found nothing.
Thank you

Best Answer

  • PeterCPeterC Registered, Tutor Posts: 150
    Accepted Answer
    1st Example
    The two periods are 2/Feb to 5/April (62 days ) and 6/April to 1/Feb (303 days)
    so the relative expenses are
    229 x 62/365
    229 x 303/365

    2nd Example
    The two periods are 17/March to 5/April (20 days) and 6/April to 16/April (11 days)
    so the relative incomes are
    785 x 20/31
    785 x 11/31


  • goldengolden Just Joined Registered Posts: 2
    Thank you PeterC
    I have been doing it correctly but not in such a straight forward way.
    So many say you divide by 365 but when it is a division of one months rent I do example 2 and kept wondering if this was OK even though in my mind it was a straight division between the amount of days in the month period for each tax yr of that months rent.

    What surprises me more is that if you google appropriating bills and expenses nothing comes up. Is the word appropriating old fashioned and now just seen as prepayment and accruals? I google that and it didnt give me this equation either though.

    It is helpful to have the clarity that I have been doing it correctly all along.

    Many thanks
  • PeterCPeterC Registered, Tutor Posts: 150
    You're welcome
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