Cash Basis of accounting

Question 1

Under the cash basis of accounting, if the business owner take goods out for his own use have price is used in the accounts?

Answer 1

A ‘Just a reasonable’ price, such as the cost of the stock

Question 2

Under the cash basis of accounting is plant and machinery an allowable expense?

Answer 2

Yes

Question 3

Under the cash basis of accounting does the 15% restriction for leased cars apply?

Answer 3

No, i does not apply

Question 4

Under the cash basis of accounting, is interest paid on a loan an allowable expense? (2)

Answer 4

Yes

Subject to a maximum of £500 p.a.

Question 5

Under the cash basis of accounting is bad debt an allowable expense?

Answer 5

Bad debts are not an allowable expense as income is only taxed when cash is received from the customer

Question 6

What is the limit for joining the cash basis?

Answer 6

£150,000

Proportioned for the number of months

A trader must use the combined receipts of all his or her businesses to decide if they are below the limit

(£300,000 for recipients of Universal Credit)

Question 7

When must a trader stop using the cash basis?

Answer 7

If receipts from the previous tax year exceed £300,000

• From all businesses
• Time apportioned