Trading and Profit and Loss Account

March 7th, 2012

Trading Account

As already discussed, first section of trading and profit and loss account is called trading account. The aim of preparing trading account is to find out gross profit or gross loss while that of second section is to find out net profit or net loss.

Preparation of Trading Account

Trading account is prepared mainly to know the profitability of the goods bought (or manufactured) sold by the businessman. The difference between selling price and cost of goods sold is the,5 earning of the businessman. Thus in order to calculate the gross earning, it is necessary to know:

(a) cost of goods sold.

(b) sales.

Total sales can be ascertained from the sales ledger. The cost of goods sold is, however, calculated. n order to calculate the cost of sales it is necessary to know its meaning. The ‘cost of goods’ includes the purchase price of the goods plus expenses relating to purchase of goods and brining the goods to the place of business. In order to calculate the cost of goods ” we should deduct from the total cost of goods purchased the cost of goods in hand. We ca

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Tags: Account, Loss Account

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Tax advice of the week: Transfer to a foreign bank account

January 18th, 2012

From 6 April this year, capital gains from foreign currency bank accounts will be tax free, says Nick Braun in Business Tax Saver. It’s good news for those who are non-domiciled, or who often keep cash in offshore bank accounts. It may also “create a new tax-free investment opportunity for all UK individual taxpayers” (though not for companies).

Say you transfer £100,000 into a US dollar account. The dollar strengthens, so that your investment is worth £115,000. If you cash it in after 5 April, the £15,000 gain will be tax free. Cash it in beforehand, and it is taxable.

If you own a foreign property that you have been renting out, you may benefit too. Until now, if rental income is accumulated in foreign currency over a number of years, it has been viewed “as a long-term investment and subject to capital-gains tax”.

As of 5 April, it will be tax free. The flip side is you will not be able to offset capital losses from foreign currency accounts against gains from other asset sales, so you may want to withdraw the funds before the end of the tax year to lock in your losses.

Tags: Account, Bank Account

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(V) Visa Inflates Escrow Account

April 1st, 2011

On Monday, Visa Inc. (V) announced that it will deposit about $400 million to its escrow account in order to fund its litigation costs. This action is considered equivalent to a repurchase of shares of the company. Meanwhile, the company used the funds allocated for the share repurchase program announced in October 2010 to raise the deposit money.

Accordingly, Visa will make the deposit under its previously implemented retrospective responsibility plan (RRP), the terms of which solely affect the financials of the company’s class B shareholders. This financial impact takes place in the form of a reduction in conversion price of such class B shares into class A shares.

Apart from funding the litigation escrow account, under the RRP, such action can also be taken when Visa has to arrange funds for its U.S. financial institutions or their associates and successors.

As a result of this RRP, currently Visa has decided to fund its litigation costs through the repurchase of its class A shares worth $400 million on an as-converted basis. This is created as a back-up to provide coverage and potential payment for litigation settlements in the U.S. a

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Tags: Account, Escrow Account

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