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Wedding dress

Wedding dress

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A new client runs a long established bridal shop.

Dresses are sold on a 2.5x Markup  for example dress sold for £2.5k would have cost £1k (for the purpose of my question let's ignore VAT)

When a customer orders the dress they pay 50% - non refundable, and the shop orders and pays up front for the dress. If the customer changes their mind they are not entitled to a refund. The dress still arrives and is the property of the bride to be. If they do change their mind, the shop do offer to hold it and resell on their behalf.

The remaining 50% is payable 4 weeks before the wedding or when fitting and alterations commence. (date dependant)

Previous advisor has been recognising no income - by deferring first 50% of income - until final delivery/fitting/acceptance and on the flip side prepaying the purchase cost.

As the first 50% is non refundable, and the dress belongs to the bride to be, I see no problem in recognising the first 50% at the outset - so in my example they would have a sale of £1.25k (50%), cost of £1k and profit of £250 before the year end (30 June), the remaining £1.25k of income being earned post YE for fitting and tailoring services.

I have also considered the overall performance of the contract insofar as the initial sale may actually involve more work than subsequent alterations so one could argue that you should recognise more than just the 50% up front - but this I doubt.

I am open to other advice/experience in this area as Wedding Dresses (or perhaps some of you act for high end tailors/outfitters where this arises) are not my usual speciality. 

Thankyou

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By Ding Dong
24th Sep 2013 12:03

thanks - what I read is

helpful but as in my case there is no refund payable, and the dress is the brides, they can safely recognise the income for the first 50% on day 1. (btw I forgot to add that the sales invoice on day 1 is not for the whole £2.5k, just the £1.25k 50% deposit)

I think it is justifiable enough to look at in that way - or am I being dim!

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By Alfie Bet
24th Sep 2013 12:16

So...

... your client relieves the bride of £1.25K on the last day of the accounts year and sends an order, plus £1K to the supplier.

Next day the supplier goes bust, and the £1K has disappeared in a puff of smoke. Your client can't source the dress that the bride has ordered from elsewhere, but that's the one she wants.

Is your client going to refund:

Nothing on the basis that that was the contractual agreement.£0.25K because the other £1K went down with the supplier.£1.25K as they are legally obliged to do; not having fulfilled their contractual obligations.

How are you going to recognise turnover and what amount's going in cost of sales.

Why do you want to "safely recognise the income for the first 50% on day 1" and pay tax on it if day one falls in an earlier year than performance of the contractual obligations.

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By grmary
22nd Apr 2015 08:17

Made2Envy Wedding Dress

 

You can check more wedding stuffs at AKnottyAffair website as well.

 

Also, check this http://aknottyaffair.com/made2envy-bodycon-midi-mini-peplum-dress-square-neckline/

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