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Is netting of income in the accounts allowed?

can you net off purchase of flights against sales as part as a turnover figure for a travel agent?

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I have been approached by a client who runs a one band travel agent via a limited company. His concern is that whilst preparing the accounts the previous accountant netted  off the cost of purchasing flights and travel packages against the money he charged the customers, ending up with just his mark-up showing as the turnover figure. His bank has raised concerns when he visited them regarding borrowing as the amounts having gone through the bank were higher than the turnover figure in the accounts.

He recevied about £100,000 last year but after the cost of purchasing travel packages had been netted off the turnover was actually shown around £10,000 before other expenses such as rent, light and heat etc being deducted. Im relatively new in practice and have never seen this before and in my mind cannot be correct.

Has anyone come across this before and is it acceptable way of doing accounts (surely it cant as its not showing a true and fair view?).


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By johnt27
26th Sep 2019 09:29

You might be new in practice but hopefully you remember your exams or have read FRS 105/102? The issue you have to decide on when reporting turnover is whether or not your client acts as agent or principle in the arrangement. That would then determine the net/gross status.

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