What are the rules/guidelines for choosing which period transactions should be entered ?
For my rental transactions I currently pro rata yearly stuff (service charges, insurance) and don't pro rata monthly stuff (rent, mortgage interest)
Also, for rent, I use the dates on my letting agent statements (rent due date) rather than the date on my bank statements. What are the rules/guidelines for this ?
TIA
Daytona
What you are doing is fine. Even if it weren't if you've been doing it for a while then the only thing you can sensibly do is carry on. Otherwise there'd be a hiccup in your figures to prevent Consistency, an important Accounting Principle.
Prorata-ing annual Insurance and Service Charges, maybe a few quarterly charges? Interest? Bank Charges? ...means you have Prepayments and Accruals to consider at your period end. Maybe Debtors? Creditors? Fixed Assets? Plant? Your computer? A Van?
If you have a double-entry accounting system you can roll these figures into the next Accounting Period and keep everything tidy.
This is for Self Assessment ie my own rental property rented via another letting agent.
Even finer ?!
Thanks for the quick response !
Daytona
Though I don't think it is legally correct.
Unless the rules have changed, when I used to do this the IR info said that the monthy things should be pro-ratad and the yearly things done exactly to days not with round to months.
A right PITA.
tim
The thing about a set of accounts is they have to be many things to many people. You want glowing profits for the bank manager, valuable assets when the time comes to sell your business, but you also want dismal losses and a paucity of assets for the tax man!
It is very easy - and very common - to keep switching principles around. It will be important that the accounts are "legally correct" one minute, "true and fair" the next, but at least the Consistency and Matching principles will ensure the discrepancies are not *too* outrageous!
Consistency: This Year's accounts are prepared in the same way as Last Year's meaning they are *directly* comparable.
Matching: Expenditure is set against resultant Sales. Invoices, Stocks and WIP in the days surrounding the accounting year-end can very easily be slipped backwards and forwards across it to manipulate the profits. If (say) the Sale moves but the Cost of Sale doesn't there will be an even bigger discrepancy.
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