I currently work in the recruitment industry and have a query regaring how we should treat a small amount of profit.
When a candidate is recruited by one of our customers, the candidate needs to complete a DBS application. We have the capacity to process this DBS for them at a cost of £50.80 (net of VAT), or £52.16 including VAT. However, we charge £52.20.
Now, we post the income and the cost to the SFP rather than P/L. However, we're left with £1.40 (52.20 - 50.80) of profit. Should this be posted to retained earnings rather than transferring to P/L?