[cityfox]

I don’t think that this is a part of the ACCA TX examination. Therefore I almost believe that you ask this question in the wrong part of the forum? It read’s more like a bookkeeping related question. Probably the guys in Financial Reporting or Financial Accounting could help? Please correct me if I am missing something here right now. It’s very late over here!

[cityfox]

Hi Imubin51,

The two terms Net income and Net adjusted Income (ANI) are two terms related to the ordinary income tax calculation. The term Adjusted income belongs according to my current knowledge to the calculation of pensions and you would use it for the determination of the annual allowances. (Please someone correct me if I am wrong right now)

Certainly for those two terms you would calculate the outcome in this way:

All your income sources like

Non savings income + Savings income + Dividend income = Total Profit – Trading Loss = Net income

Net adjusted income is something you would determine in order to figure out if the person will be eligible for a Personal allowance and if so how much!

Net Income – Personal pension contributions (Gross) – Gift aid contributions (Gross) = Net adjusted Income

For a self employed person Adjusted income is usually simply Net income!
Otherwise it would be Net income – (or + I am right now not 100% sure) Pension contributions.

Hope this helps.

[cityfox]

Hi Nadiranks, Yes it is still used in the way you describe. All entities for which you have an direct or indirect 51% interest ownership will have to be added together (Company 1 + Company 2 etc..) and divide it by the 1.5 Million large company threshold in order to determine the amount of Profit each of these Companies has to have at least in order to being perceived as a “large company” by HMRC for tax purposes. If the company is being perceived as being large quarterly payments on account will have to be made instead of annual payments. Important to mention is also that for augmented profit calculation it doesn’t matter if a 51% company is resident or not.

[cityfox]

Excellent!!!! Thank you very much, this is really all I needed to know!!! This distinction that “Only service costs that support production will be absorbed as overheads” was missing Can I give you somehow a star or a thumbs up?

[cityfox]

Hi Kim,

In fact this is not work related as I do not work in Cost Accounting and I am currently trying to understand this topic for my exam but also for my potential work later of course.

My main issue with this topic is trying to understand how it is possible that we have on an Income Statement by the end of the year all these service overhead costs like for example Rent and Rates or Administration related expenses etc. mentioned in an extra section if they will be all “Re- apportioned” to production cost centres and into Inventory or Cost of Sales Account. There I am clearly missing something and I can not find any explanation anywhere. Sorry to bother with this but I am having my exam next week and I would like to fully grasp the topic instead of just learning the exercises. On the one hand I have read at some point that ONLY Production overheads will be absorbed but before the overheads being absorbed non production related overheads (Service costs) will be “Re- apportioned” to Production cost centres.

Probably I should ask which Overheads will “not” or never be “Re-apportioned” and included in the Production costs.

Sorry to bother you with this but it is bothering me that I obviously have there a knowledge hole that I just need to fill.

[cityfox]

Hi Kim2311,

Thank you for your quick response. I have to admit I did not know that this is the case.

I believe I do understand better thanks to your explanation but I still struggle a bit in understanding the process. Let’s say we have the following 2 examples, will this be how it’s going to be re- allocated?

GL Account no. | GL Account Description
4000 Cost of Sales
8000 Rental Costs

Cost Centre no. | Cost Centre Desc.
70000 rental Costs
10000 Production Overheads

Example no. 1)

We book a journal and re- allocate the rental fees only between the Cost Center and leave the GL account the same.

GL Account | Cost Centre | Debit | Credit
8000 Rental Costs | 70000 | | Cr
8000 Rental Costs | 10000 | Dr |

Or example no. 2)

We book a journal and re- allocate the rental fees not only from the Cost Center but also to the different account.

GL Account | Cost Centre | Debit | Credit
8000 Rental Costs | 70000 | Cr |
4000 Cost of Sales | 10000 | Dr |

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