Self employed Income and Expenditure Account - no P&L

Self employed Income and Expenditure Account -...

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I have a new Self employed client who has asked me to prepare his accounts and file his self assessment tax return.

He has passed me a very organised file but rather than seeing the Sales he has generated he has merely given me his drawings.

His previous Chartered accountants simply prepared an Income and Expenditure account based on Drawings as income and then deducted expenses to produce Net profit.

Is this sufficient to produce accounts in support of a Self assessment tax return for the self employed section?

I have not been provided with a bank staterment, they are merely following what they have done previously.

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Time for change
By Time for change
18th Sep 2012 12:28

In my view the information

is lacking and, given what you've said, your "new broom" needs to sweep clean. What has gone before, has gone on, but things now need to change.

Whilst there is nothing wrong in preparing just a P&L account, it does need to include figures which can be relied upon. If sales are validated by way of copy invoices, or receipts, then the total value of those records needs to be shown as sales.

Whilst there's always more than one way to skin a cat, the methods used here before, would, in my view, also hang the poor thing!

Thanks (2)
Woolpit Gus
By nutwood
18th Sep 2012 12:39

An Income and Expenditure account should be no different to a P & L.  They are just different names for the same thing.

The only deficiency in what you have seems to be that instead of having sales (or fees earned or whatever the appropriate term may be), you have the proprietor's drawings.  Correct that and check that the expenses match the records and you have sufficient.

You don't say what the client's business is, which may have a bearing on the lack of bank statements.  There are many businesses where the client can use their personal bank account but keep adequate records of sales.  I have several where there are no fixed assets, debtors or creditors.  Travelling may be claimed on a mileage basis, income may be all in cash but evidenced by an annotated diary or similar.

As long as you cover yourself by apropriate wording in your certificate on the accounts and a declaration from the client that they have provided you with all relevant information necessary.

Thanks (1)
Teignmouth
By Paul Scholes
19th Sep 2012 15:44

Prior year errors

I think you should be advising the client to query this method with the previous accountant as, almost certainly, this will have lead to incorrect profits having been declared.  This could put you in a difficult position.  It would be the job of the previous accountant to correct the numbers and re-submit.

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