Farm Accounts

lstmd

Hi all,

I have prepared my mothers farm accounts and uploaded onto revenue website for the past few years.


I buy store cattle in August keep them over the winter and slaughter off the grass the following summer. The enterprise is small scale and is belonging to my mother.

I was unable to make enough silage to buy my usual number of stock this winter. My neighbour has said if I do not buy my usual number of stock I will have a tax problem.

I have prepared a full set of accounts each year calculating my cost of sales as follows

Opening stock + purchases - closing stock = cost of sales

As a result I'm matching my cost with its revenue each year and if I reduce my stock numbers this winter it will not result in any tax issue.

Can anyone clarify if

1. How I have consistently calculated my cost of sales is correct?
2. If so how I could have a tax problem by reducing my numbers?
3. If incorrect how should I have calculated my cost of sales?

I would appreciate any advice.

Thanks in advance.

Bass Reeves

In normal accounts stock in hand is given a value. Lets say you value weanlins at 500 euro and stores at 800. So normally if a lad bought the stores at 900 they went in a 800 and if he bought them at 700 they went in a 800.

Part of his profit/loss was calculated off the 800 euro stock value and if he bought them at 700 he was making a 100 euro profit and at 900 a 100 euro loss. This was added to his normal profit loss account. You actually in technical terms adjust you stock values every year. Where the real issue is where lads have not adjusted there stock values for decades and weanlings go in at 150 euro and stores at 300 euro. if these lads do not buy they would have a tax issue as they would have sales money in hand but only low stock values to adjust there P/L account

For example Tom sells 20 bullocks for slaughter @ 1200 each he has sales of 24K. He normally buys 20 stores at 800K. His stock values is 300/store. His calculation is 24K in sales less cost of sales ( we assume that only cost is replacements) 16K leaves a profit of 8K. His stock value is the same at the start and end of year at 6K

Tom dose not replace 12 of his bullocks.

Sales are 24K replacements are 6.4K.
His opening stock is 6K a(20X300 euro)
His closing stock is 2.4K(8X300) euro.
His profit is 24K-6.4K =17.4K.
From 17.4K he can deduct only 3.6K for loss in stock value.
His profit is 13.8K

If his stock values were the same as his purchass costs
Sales 24K
Opening stock is 16K(20X800)
Closeing stock is 6.4K(8X800) euro
His profit is 24-6.4K=17.6K
But from 17.6K he can deduct 9.6K for stock loss
His profit is 8K.

I think that is more or less how it works. Alot depends on how you did your first day accounts to allow for stock adjustments.

Lakhill will now come along and explain it the right way.

lstmd

Thanks for that.

Oldira

lstmd wrote: »

Hi all,

I have prepared my mothers farm accounts and uploaded onto revenue website for the past few years.


I buy store cattle in August keep them over the winter and slaughter off the grass the following summer. The enterprise is small scale and is belonging to my mother.

I was unable to make enough silage to buy my usual number of stock this winter. My neighbour has said if I do not buy my usual number of stock I will have a tax problem.

I have prepared a full set of accounts each year calculating my cost of sales as follows

Opening stock + purchases - closing stock = cost of sales

As a result I'm matching my cost with its revenue each year and if I reduce my stock numbers this winter it will not result in any tax issue.

Can anyone clarify if

1. How I have consistently calculated my cost of sales is correct?
2. If so how I could have a tax problem by reducing my numbers?
3. If incorrect how should I have calculated my cost of sales?

I would appreciate any advice.

Thanks in advance.

I'M an Accountant so..

1/ Your cost of sales is correct
2/ You dont. Your neighbour is raving
3/ See 2

Baroom accountants are a pain in the ass!