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Buying and Selling Properties

Cost of Sale

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I have first property client ( limited company), he buys , rennovates them and sell it.I understand that is cost of sale so no fixed assets involved.Question is do I have to show closing inventory for the properties which are unsold at year end  or just show as purchases in the year they were purchased? many thanks

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By Paul Crowley
26th Aug 2021 10:00

Add to balance sheet and credit income with Work in progress
Value at total cost to date (provided a profit is expected)
Not just purchase price of building
Assumed these are short term holding of property

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Replying to Paul Crowley:
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By Newinpractice
26th Aug 2021 10:16

Thanks, there was no income in first year( in question), and property was sold next year. I will still show as closing Inventory( WIP) on Balance sheet.

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By David Ex
26th Aug 2021 10:01

Are you a sole practitioner or are you working for someone else’s practice?

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Replying to David Ex:
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By Newinpractice
26th Aug 2021 10:19

Recently started working for my own , have worked few years for some one.thanks

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By Duggimon
26th Aug 2021 10:19

All limited companies account on the accruals basis. Any one of them buying stuff to sell on should have stock recognised at the balance sheet date. Your alternative proposition is the cash basis which is not permitted.

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Replying to Duggimon:
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By Newinpractice
26th Aug 2021 10:54

Thank you, just wanted to double check with seniors :)

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Replying to Leywood:
By Duggimon
26th Aug 2021 11:37

If rhangus returns at all he's not going to read this, he's going to tell you what he thinks you should have posted instead, which is presumably either a capital gains tax computation or a sincere and grovelling apology.

I'd like to take this opportunity to apologise to Newinpractice whose thread has been hijacked [moderated]. Hopefully they got the answers needed before it happened though.

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Replying to Duggimon:
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By Newinpractice
26th Aug 2021 11:45

yes I have ...... many thanks to all of you :)

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Stepurhan
By stepurhan
27th Aug 2021 09:19

As well as the requirements of accounting standards, think of how it looks to the outside world if you don't have it as stock.

A company with a big loss and almost certainly a heavily negative balance sheet. If they need a mortgage for a future property they are going to struggle. Showing as closing stock/WIP eliminates that loss and makes the balance sheet look at lot healthier.

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John Stokdyk, AccountingWEB head of insight
By John Stokdyk
10th Sep 2021 11:08

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