Partnerships & Cash Accounting Flashcards
What are notional losses in a PSR?
How do you deal with notional losses in a PSR?
When the partnership makes a profit for the year but an individual partner makes a notional loss due to profit sharing agreement
Loss is reallocated to profitable posses so original parner with notional loss has trading profits of 0 and other partners share the loss by;
Loss * Their profits / (Their profits + other partners profits)
What are notional profits in a PSR?
How do you deal with notional profits in a PSR?
Notional profits are when the partnership overall makes a loss but an individual partner makes a notional profit due to PSR
The notional profit is reallocated to the loss bearing partners
Profit * Partner’s loss / (Partner’s loss + other partner’s loss)
Do real partnership losses need to be reallocated?
No loss correction if losses/profits of individual partners are consistent w partnership performance
What is a specific loss relief rule relating to LLP partners?
CY / CB or Opening Year loss relief is restricted to the amount of capital that partner has contributed to the partnership.
The remainder can be carried forward against future trading profits
What are the Cash Basis entry / exit limits
Cash basis can be used if receipts for tax year do not exceed £150,000
Trader must leave if receipts > £300,000
These figures are in tax tables
How does the TTP calculation differ under cash accounting than in the accruals concept?
Capital Allowances - cannot be claimed on P&M, only on cars
Capital assets are an allowable expense - but not for cars as CAs are allowed
Sale proceeds of capital asses are allowable income - except cars
Business use % used for adding back allowable expenses
Only £500 of interest is allowable per year
Losses can only be offset against future trading profits
What calculation always needs to be applied to an existing business that previously used the accruals method, joins the cash accounting scheme?
How does this differ for a firm that is exiting the cash accounting scheme?
opening debtors + opening stock - opening capital = adjustment expense/(income)
opening debtors + opening stock - opening capital = adjustment (expense)/income
With the expense being spread across 6 years
