Forum

topBanner
First Previous - Page 1 of 1 - Next Last

L3 Bookkeeping: Goods taken for own use

Wilbur
  • Member
  • Practice Licence
  • 106 posts
  • # 80743

My training provider has made the following statement in the training manual; 

a) "It has been normal practice that where goods are taken for own use they can be charged to the owner at the purchase price, rather than the selling price."

Makes sense to me...

b) "However HMRC have ruled that for self assessment purposes, goods must be taken at selling price."

Really?

Does this mean, hypothetically, that if I take, for example, the total of one month's 'purchases' (intended initially for re-sale) for my own use, that my purchases account will have a negative balance i.e. £1,000 'Purchases' less £1,500 for own use, and £1,500 entered into 'Drawings' likewise. 

So I can effectively take or use a higher value of goods than I actually purchased?

Comments please, because this doesn't sound correct.
I haven't yet been and looked at HMRC.gov.

Thank you. 

  • Too old to die young...


  • Quote
KerryB
  • 269 posts
  • # 80747

Hi Wilbur,

Taking the purchases out if the company wouldn't literally be taken from the purchases account, your balance on that account would still be £1000 DR. It would be classed as a sale of goods, therefore would CR the Sales account £1500.

Edit - Yes the double entry would be to DR Drawings, rather than Bank or Debtors as with a 'normal' sale.

Kerry

Edited at 12 Mar 2012 03:31 PM GMT

  • www.berrybookkeeping.co.uk

    My responses are based on my opinions, not necessarily facts.

  • Quote
Wilbur
  • Member
  • Practice Licence
  • 106 posts
  • # 80748

KerryBsaid: "It would be classed as a sale of goods, therefore would CR the Sales account £1500."



But that would give incorrect profit figures (not to mention others) in the T, P&L report.
I wouldn't go so far as to say 'False accounting', but surely it would contravene GAAP, FSB, IAS or some-other regulation?

I could, in theory, 'use' my purchases, 'sell' them to myself at a profit, 're-sell them to my business, and do it all over again, thereby showing false profit figures for banks, lenders or 'other interested parties'.

I appreciate that the Sales account Cr would be balanced by the Drawings account Dr, but wouldn't the 'income' or profit need to be accounted for somewhere like the cash/bank account?

PS. I nearly forgot: in a task in the same study-unit, goods used for own purpose were deducted from the purchases total in the T, P&L account!  

Edited at 12 Mar 2012 03:59 PM GMT

  • Too old to die young...


  • Quote
  • Fellow PM.Dip
  • Practice Licence
  • 9 posts
  • # 80754

Wilbur said:

“However HMRC have ruled that for self assessment purposes, goods must be taken at selling price”

When preparing the adjusted trading profit for self assessment purposes, the owner must add back the lost profit on the item removed for his own use.

 So, if an accounting entry has been made: DR Drawings £1000; CR Purchases £1000 - then, Adjusted trading profit = Trading profit + £500

Kind regards,
Flo



Edited at 12 Mar 2012 05:42 PM GMT

Edited at 12 Mar 2012 05:44 PM GMT
hdodsworth
  • 69 posts
  • # 80818

I believe that HMRC views goods taken for personal use as a taxable supply from a VAT perspective. Therefore, I would argue that you would need to CR the Sales account.

Here's an excerpt from 'how to complete your VAT return'
http://www.hmrc.gov.uk/vat/managing/returns-accounts/completing-returns.htm


Box 1: VAT due on sales and other outputs

....

* goods or services, such as products or computer software, that you or your staff take out of the business for personal use 

Hope that helps.
 
First Previous - Page 1 of 1 - Next Last
bottomBanner
loading