Long accounting period question please help?
Pjdav
Registered Posts: 27
in Business Tax
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 ?
Thanks
Pj
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 ?
Thanks
Pj
0
Comments
-
Profit is apportioned on a time basis so it would be:
(£10000 x 10) + (£12000 x 5) = £160000
£160000 x 12/15 = £1280000 -
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...Accounts Executive, ғɪᴀʙ ᴍᴀᴀᴛ
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