Prizes for pub quizzes

Prizes for pub quizzes

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I have a new pub client who runs several quizzes per week. He 'buys' drinks from his own bar to use as prizes and puts the 'sale' through the till. No money is paid over.

Question: what is the correct accounting treatment for this? Presently the takings include these 'sales' so VAT is payable against them. Should I show the 'cost' as an expense and take the VAT accordingly?

Many thanks
Dawn

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Euan's picture
By Euan MacLennan
01st Mar 2008 19:33

Not sales
Obviously, it is not sales and hence, cannot be cost of sales (unless there is an entry fee for the quizzes which is included in sales). On the basis that holding a quiz directly increases the sales, you should include it as a direct cost, rather than an overhead.

There may be some confusion with the correct treatment of stock withdrawn by the proprietor for personal use, which should be valued at selling price and the output VAT paid over if input VAT has been claimed on the purchase. However, this is not the case here. The stock is being used for a business purpose, so it is fine to reclaim the input VAT on the purchase and charge the net cost to the prize account within direct costs.

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