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Long accounting period question please help?

PjdavPjdav Registered Posts: 27
Hello All, i have the following question which i'm little confused about can someone please help.

K LTD makes up account for A 15 month period of account to 30 November 2016. Trading profits were £10,000 per month for the first 10 months and £12,000 per month thereafter, it made a capital gain of £10,000 in January 2016 & a capital gain of £20,000 in October 2016.

True or false ?
Trading profits will be £124,000 in the accounting period to 31 August 2016 and £36,000 in account period to 30 November 2016.

I put TRUE but its false, can someone explain why?

The book said because the trading profits were £128,000 to 31 aug 2016, but where are they getting the extra £4000 from ?



  • fournaanjezfournaanjez Registered Posts: 32
    Profit is apportioned on a time basis so it would be:

    (£10000 x 10) + (£12000 x 5) = £160000

    £160000 x 12/15 = £128000
  • KoopaCooperKoopaCooper London, UKMAAT, AATQB Posts: 226
    Even though you know the profit for each month individually, it still gets apportioned on a time basis as if you didn't know each month's individual profit.

    The first 12 months shows a profit then of £128,000 (as @fournaanjez says above), and the "extra" £4,000 comes out of the profit for the remaining 3 months, which shows a profit of only £32,000 (instead of 36).

    I know, I feel it would make more sense if you know each months' individual profits to add them up accordingly, but this is HMRC we're talking about... :D
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