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Hardware Fund

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Good afternoon,

We have recently taken on a client who operates a hardware fund for their customers.  We are in the process of moving the client from Sage to Xero and completing YE accounts and it would appear that the previous accountant has the hardware fund on the company balance sheet as an asset.  In our minds this should surely be a liability?  The fund raises credit notes for customers which they can then use to buy hardware off the company.

Is there another way of looking at this which we are missing...?

Thank you for any help you can offer!

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By Paul Crowley
06th Oct 2020 15:03

Trouble is the word FUND
Sounds like a good thing, but really a bad thing.
Did client just tell accountant the balance once a year?

Cannot even think what they are attempting to do, But if the top up is an expense to company, that creates a liability. If they give too much stuff away to set against it, the balance will reduce the creditor and make it look like an asset.

Does this 'fund' really serve a valid purpose?

My guess is that someone tried to reduce tax by creating a possible future refunds account.

I would suggest you find out what it really is and why it exists

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