Advanced Payments And Corporation Tax

Advanced Payments And Corporation Tax

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So that time of year is coming and I have to file my first accounts for my LTD company.

We sell advertisements on a website and our clients tend to pay us in advance, usually in 6 month blocks. For example two of our biggest clients have just paid us for 6 months from Sept-Feb.

I don't understand how to account for that when I do my accounts. Let's say they pay £1,000 per month and that leaves me with £6,000 for one client. Then let's say my salary is £1,000 per month. My accounts would suggest that I have made £5,000 profit, but in actual fact over the full 6 months I make nothing.

How does this work?

Thanks

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Euan's picture
By Euan MacLennan
01st Oct 2013 13:11

Talk to an accountant

... about including deferred income as a creditor in your accounts, rather than as sales.

If the advertising covers September to February and your accounts are made up to 30th September, the amount of deferred income would be £5,000.

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