A sole trader t/a mot garage / vehicle repairs has approached me to prepare the annual accounts and tax return. No records of sales have been recorded for the full year, other than debit/credit card payments paid into the bank and also cheques from customers paid in with a paying in book with no details (no cash paid in to the bank from customers).
The business deals with quite a lot of cash because staff wages are paid via cash and I would say 60 to 70% of purchases as well.
How would other practitioners / accountants / technicians or bookkeepers deal with this?
As no balance sheet is required and HMRC were not very helpful the only way I can think of to prepare a profit and loss would be to:-
Create a cash book from the bank statements.
List all the purchases and expenses from the invoices then match any that have been paid via the bank.
As the business has no credit terms with it's suppliers and pays on delivery (out of choice), the difference between what has been paid via the bank and the full value of the purchases should be the cash paid out, therefore the cash received as sales; excluding profit.
Add this cash sales amount to the identified sales in the bank receipts, then add any other known cash payments for instance wages, drawings etc again adding this to the sales.
The only thing missing (I think) would be the profit which would there be an average gross profit for this particular business that I can use?
Any opinions please, tell me if I am just completely wrong here.