Hello,
Just a simple query, and I've asked this before I'm sure but couldn't find it. I am in the process of filing my tax return and looking at the profit and loss report, I realized that my net income has been reduced by £1000 because of a repair cost to my vehicle, however, the invoice for the work has been paid via credit card and has not yet been been paid off.
So technically, as I'm self employed, this cost shouldn't affect my net income until the credit card has been paid, surely?
All I have done is shift the liability from place to place?
Thank you
Hi Duncan,
Solar Accounts uses the 'accrual method' when calculating the figures on
your Profit and Loss report - this is the standard method that most
businesses use. This means that the expense is incurred when the repair
work is performed - not when you make the payment for the work. (One way
of looking at this is to say that you effectively took out a loan from your
repairman and you pay off that loan when you pay the credit card bill - but
taking out loans and paying off the principal doesn't have any effect on
your income or expenses)
