Accounts prep queries

Accounts prep queries

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I am preparing a set of accounts for a small company which manages property rentals and which has a £ and € bank account.  I have translated the individual transactions at the rate on the day of the transaction and the year end bank balance at the year end rate.  I have put the difference to exchange gain/loss.  I am now getting confused over some other points:

1. Transactions in the € account tend to be money received from renter and 75% of that money paid to the property owner.  The balance is commission.  I have translated these at the rate active on the day of the transaction, but how do i account for year end creditors?  For example, received €1,000 before year end, and paid €750 post year end.  Is the creditor translated at the year end rate, and any differences included in the exchange gains/losses for the year?

2. The accounts will be under FRSSE, which i have never used before.  Can anyone tell me where i can access a copy of the FRSSE (and which one will accounts for the period 8/12/08-31/12/09 be prepared under).

3. Where deposits have been received before the year end for properties to be rented out after the year end, do these get accounted for as deferred income? Would i include the commission amount as deferred income and the balance as amounts due to the property owners?

4. Where travel is involved (reasonable given properties are in France) and the director has taken their family with them, would you be happy to include their portion of airfares, hotels etc in the company expenses?

5. Finally can anyone point me in the direction of somewhere which gives guidance on the pros and cons of a director taking a salary vs dividends?

Thank you

Replies (5)

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By Towards excellence
24th Aug 2010 12:29

My answers are....

1. Year end rate.

2. FRSSE 2008

3. Deposits should be treated as creditors.

4. Yes, in my opinion.

5. Hopefully someone will suggest.

SA

 

 

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Euan's picture
By Euan MacLennan
24th Aug 2010 13:50

I agree

1.  Just as the balance on the € account should be stated at the year-end FX rate, so should the balances due to the owners under Creditors.

2.  FRSSE (effective April 2008) from www.frc.org.uk/asb/technical/frsse.cfm.

3.  The commission element of deposits received for lettings after the year-end would be Deferred Income under Creditors at the year-end.  Any balances not yet paid to the owners would be trade Creditors.

4.  Certainly no more than the business proportion of the director's portion of the travel expenses.  She would not have taken her family with her if she was not also going to take a holiday herself, so you must disallow her private element.

5.  This has been aired many times.  It saves NI contributions without any loss of state pension entitlement to take a salary of between £5,044 and £5,715 in 2010/11.

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By zarathustra
24th Aug 2010 16:27

Profit / loss on exchange rate

Is Forex a separate disclosure item ? The reason I ask is, if it is not (I do not think it is) I cannot see what difference it makes what rate you translate the individual transactions at, as the profit will be unnaffected (assuming you still translate y/e balances at the year end rate).

Please correct me if I'm wrong.

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By m.melville
24th Aug 2010 16:41

I assume...

..you will be passing them to a suitably qualified accountant as they are all pretty bog standard stuff to be honest.

I dont agree with the first reply, in my opinion, any non business element would have be disallowed.  Possibly the best way of going about it would be to find out what a flight there and back and possibly an overnight stay would have been and deduct the difference.

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Euan's picture
By Euan MacLennan
24th Aug 2010 17:20

Exchange difference

Yes - the exchange difference on restating the closing € balances from the transactional rate to the year-end rate is a separate item.  Although you might be able to post the difference on creditors to purchases and on debtors to sales, where would you post the difference on the € bank account?

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