Increase Partnership Profits?

Increase Partnership Profits?

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We have a long established Partnership client of two sub-contractor's where
there has been a similar rate of gross profit for many years. The normal
year end is the 30th April but just before the 5th April 2002 one of the
Partners died after approximately one year fighting cancer which we
understand restricted his working activities progressively up to the date
of
death.
Accounts have been done to the 30th April 2002 and although purchases have
fallen from approximately 30,000 to 16,000 sales have fallen from
approximately 59,000 to 20,000. Closing stock has remained near enough
the same.
To complicate matters although the business was a Partnership the two
Partners in effect ran their respective parts of the business
independently
carrying their own stock and invoicing separately but on common
Partnership
invoices. The surviving Partner did the book-keeping and recorded his own
side plus what he was given by his Partner i.e. copy invoices with
purchase
and expense records. Although there were numbered invoices and some of
the
invoice numbers are missing the Partners unfortunately did not strictly
follow the number sequence and we have not been able to obtain those
unused
by the deceased Partner.
We have explained the problem to the surviving Partner (who incidently
nearing retirement) and he is adament that he has recorded all his sales,
purchases and expenses but he cannot verify of course that the information
received from his former Partner was complete. The surviving "widow" and
Personal Representative cannot help either.
It seems we are left with either completing Tax Returns based on the
Accounts as recorded and submitting with/without a full explanation to the
Inland Revenue or making an adjustment to increase the gross profit to a
figure similar to previous years but that would produce an additional
19,000 plus of sales with consequentley additional Tax/NIC and VAT.
Does anyone have any other thoughts or ideas how we should proceed?
Thank you for any help in anticipation.

Anonymous

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By neileg
14th Aug 2002 11:11

Forwarned is excessively worried?
I think you need to sit back and take an objective view of what is happening here, and only worry about the effects later.

You have stated that there are effectively two businesses under one umberella. It is quite possible that the surviving partner's side of the business has been carried by the deceased partner's side. The gross profit you are seeing may be perfectly correct!

Other possibilities include failing business accumen due to the illness, deteriorating trading environment, etc. This would also result in the situation you have found, without there being anything amiss.

Of course the could be plenty wrong with the books and there could be major fraud!

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