Cash Basis Of Accounting Flashcards
How is goods taken out for owners use treated on the cash basis?
Just and reasonable amount
EG cost of stock
How is plant and machinery treated on a cash basis
Payments allowable expense
Sales treated as taxable income
Cars are claimed with capital allowances in the normal way
How are hire purchases treated under cash accounting?
Deductions allowed for payments of hire purchase
How are non depreciating assets dealt with under cash accounting?
Still not an allowable expense
Does the restriction for leased cars apply for cash accounting?
What is the restriction?
Does NOT apply
For accruals, trading expenses for leased cars have a 15% restriction on lease cost if CO2 >50g
How is loan interest treated in cash accounting?
All loan interest is allowable however there is a maximum £500 allowance!
How are bad debts treated in cash accounting?
Bad debts are NOT allowable
The trade debtor was never taxed as cash was not received so the bad debt cannot be taxed either!
Cash receipt limit for joining cash basis?
Time apportioned?
150k (300k universal credit)
Limit is time apportioned to accounting
period
Must combine cash receipts for all businesses and elect all or no businesses for cash accounting
Changing from accruals basis to cash accounting
Fixed rate mileage allowances treatment post change?
Capital allowances?
Amounts taxed under accruals basis?
If fixed rate mileage allowances were used pre change then they must be used for the cash basis
Deduction made for P&M to clear tax written down values apart from cars
Net adjustment to account for items already taxed under the accruals basis
What is the receipts limit for leaving the cash basis?
300k time apportion for accounting period
Must combine all businesses receipts
Leaving cash basis
Treatment of plant and machinery?
Future accruals Sale of P&M when purchased under cash basis?
Unrelieved P&M EG hire purchase not yet paid added to capital allowances
Sale under accruals basis of P&M purchased under cash treated as taxable income
Leaving cash basis
Accounting for net adjustments:
Net expense?
Net income?
Net expenses deductible in full in the first accruals period
Net income spread equally over 6 years
Trader can elect to tax sooner
Cash basis key impact on Partnerships?
No partner can deduct: Interest paid on loan to: Invest in partnership Buy P&M From their total income
Impact of cash basis on capital gains tax?
As the sales receipt is taxable in full the gain will be taxed as trading income and therefore exempt from capital gains tax
Cash basis impact on VAT?
Must also use the cash VAT acheme
