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Tax filer classification

AndreaMcAndreaMc MAAT, AAT Licensed Accountant Posts: 14
in Bookkeeping
a client of mine has a shop that she buys clothes to sell. She does not make them they are purchased as finished products. Am I right in classing these purchases in COS? our accounting software tax filer is trying to classify COS purchases as raw materials. I just want a second opinion before contacting tax filer regarding this.
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  • MarieNoelleMarieNoelle Trusted Regular Hampshire/Surrey borderModerator, MAAT, AAT Licensed Accountant Posts: 1,356
    Hi @AndreaMc
    Is it a ltd co? When filing accounts as a micro-entity the cost of sales on the P&L is listed as "cost of raw materials and consumables" - the format of the P&L is mandatory so for reporting purposes it may not be the most suitable format.
    But I agree with you that these are cost of sales that need to be adjusted at year end for stock.
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  • readerreader Experienced Mentor MAAT, AAT Licensed Accountant Posts: 1,013
    AndreaMc said:

    a client of mine has a shop that she buys clothes to sell. She does not make them they are purchased as finished products. Am I right in classing these purchases in COS? our accounting software tax filer is trying to classify COS purchases as raw materials. I just want a second opinion before contacting tax filer regarding this.

    As you have already noticed, raw materials would be more appropriate if she bought the actual fabric rather than the finished product. Purchases would be more appropriate for the cost of finished goods, and then an adjustment for closing stock held at the balance sheet date (lower of cost vs market value).
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  • AndreaMcAndreaMc MAAT, AAT Licensed Accountant Posts: 14
    Hi Marie, yes it is a limited company. I am filing it as a micro entity, as this doesn't seem to be the best format, which would you recommend?
    Thank you Andrea
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  • readerreader Experienced Mentor MAAT, AAT Licensed Accountant Posts: 1,013
    FRS102 for small entities? Rather than FRS105 for micro.
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  • MarieNoelleMarieNoelle Trusted Regular Hampshire/Surrey borderModerator, MAAT, AAT Licensed Accountant Posts: 1,356
    reader said:

    FRS102 for small entities? Rather than FRS105 for micro.

    The decision ultimately lies with the client.
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  • AndreaMcAndreaMc MAAT, AAT Licensed Accountant Posts: 14
    Thank you for your help greatly appreciated.
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  • readerreader Experienced Mentor MAAT, AAT Licensed Accountant Posts: 1,013
    Client would probably prefer micro entity accounts due to limited disclosure.

    @MarieNoelle

    Is there any benefit for clients to chose FRS102?

    Have any mortgage companies/banks/lenders that your clients work with required FRS102?
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  • AndreaMcAndreaMc MAAT, AAT Licensed Accountant Posts: 14
    Hi Both, sorry I have further questions on this. Thank you both for your help.

    I do agree FRS102 after your comments would be more suitable, however can we change it from micro entity FRS105 as it has previously been submitted to FRS102 without any implications?

    also on the accounts cover sheet do we have to state the accounts are unaudited or can we put this in the accountants report or somewhere else instead?

    Thank you really appreciate your help!!
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  • MarieNoelleMarieNoelle Trusted Regular Hampshire/Surrey borderModerator, MAAT, AAT Licensed Accountant Posts: 1,356
    edited February 19
    Hi @AndreaMc
    The transition from FRS105 to 102 can have some tax implications and I would refer you to articles on the subject from Steve Collins (accessible on the AAT website- CPD).

    Regarding the format which accounts production software do you use?
    Edit : silly question it's in the title of the thread :p
    No experience of Taxfiler but I would expect it guides you through presentation and notes?
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