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Claudia Nautilus had taken a sailing jacket from stock to give to her aunt on her birthday. The cost of the jacket was £120 and the margin was 25% of selling price.
Just want to confirm whether this expense is allowable.
Thanks
Hi Ria,
Wish you best of luck, To have a better grasp on this topic.
I don’t know why you are asking about expense, this is not an item of expenditure it’s revenue.This will be regarded as goods for personal/own use.
To find out the correct taxable trading profit you need to have an adjustment for this transaction.
[{This transaction will be treated as Claudia is making the sale to himself as like as third party based on market price of the goods. (otherwise he would have been able to sale this goods to other based on the market prize) there for he could make profit on this goods.}]
For the peruse of Taxable trading profit it is not allowed to exclude the amount from profit, he should add it back to the profit.
Adjustment will depend on the treatment on the account:
1) If Claudia has not not accounted for the removal of the goods, the full selling price must be added to the adjustment of Taxable treading profit. coz the purchase price is already included on the cost of sale but sales has not yet been recorded.
the full selling price of the jacket is 120 + (120×25%) = 150
2) If Claudia has accounted for the removal of the goods, he just need to make an adjustment for the profit element of the goods to the Taxable treading profit. coz the the purchase price is already included on the cost of sale and sale.
The profit element of the jacket is 120×25% = 30
*** This rule does not apply for the Services.
is it clear ??? ,,,,,,,,,,, if not reply the point.
Well wisher
Mahfuz
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