Livestock purchase, current or capital expense?

arctictree

Lads, increasing my flock size so have to do a big purchase this month. Do any of ye know if this is treated as a current or capital expense in the books? Thanks

freedominacup

arctictree wrote: »

Lads, increasing my flock size so have to do a big purchase this month. Do any of ye know if this is treated as a current or capital expense in the books? Thanks

Mrs freedom says it's a current expense. She should know. She answers these sorts of queries on a professional basis.

alps

freedominacup wrote: »

Mrs freedom says it's a current expense. She should know. She answers these sorts of queries on a professional basis.

Would Mrs Freedom know if that "cost" is offset by an increased stock value.

freedominacup

alps wrote: »

Would Mrs Freedom know if that "cost" is offset by an increased stock value.

I'll check. But I think not.

Bass Reeves

My understanding is that stock are put in at an end of year value. Over the year lads leave it as this and it can create a headache if destocking or changing type you are buying for any reason. An example. If I noemall buy 18 month old old cattle in costing 1K each they may be logged at a book value of 800 or 1200 euro if that is my end of year value.

kowtow

freedominacup wrote:

Mrs freedom says it's a current expense. She should know. She answers these sorts of queries on a professional basis.

Surely it's a capital item?

freedominacup

kowtow wrote: »

Surely it's a capital item?

No. Not anymore than iPhones in the store are to an iPhone shop iykwim.

Basically

Opening stock plus stock purchases minus closing stock equals cost of sales. The closing stock does turn up in your current assets at the same time. If you've added a lot of stock through purchases it's a cost in that year. Stock valuations climbing by natural increase have no purchase cost and will be a positive in your trading account.

kowtow

freedominacup wrote:

Opening stock plus stock purchases minus closing stock equals cost of sales. The closing stock does turn up in your current assets at the same time. If you've added a lot of stock through purchases it's a cost in that year. Stock valuations climbing by natural increase have no purchase cost and will be a positive in your trading account.

If you start with 0 buy 1000 and still have them at end of year then you've just moved money to an asset though? There won't be any cost deductible for them in the current year? (Leaving aside growth or depreciation...) ?

freedominacup

kowtow wrote: »

If you start with 0 buy 1000 and still have them at end of year then you've just moved money to an asset though? There won't be any cost deductible for them in the current year? (Leaving aside growth or depreciation...) ?

There will be. The cost of buying them.

kowtow

freedominacup wrote:

There will be. The cost of buying them.

Minus closing stock?

patsy_mccabe

Good info here;
http://www.kbg.ie/Taxation_Brochure_2012.pdf

freedominacup

kowtow wrote: »

Minus closing stock?

No. Purchases. We think of stock as an asset of the fixed variety the taxman treats them the same as pallets of pampers in a supermarket.

kowtow

freedominacup wrote: »

No. Purchases. We think of stock as an asset of the fixed variety the taxman treats them the same as pallets of pampers in a supermarket.

then why subtract the closing stock value from the net purchases / sales?

What you describe appears - to me - to be the same as stock in trade, i.e. pampers in a supermarket more or less, but I am no bookkeeper!

Edit: you can't break the rules of double entry, the ghost of Pacioli would turn in his grave.

Buy stock: credit the bank, debit the expense account OR credit the bank, debit the asset account - the *change* in stock value still makes it to the current (expense) account or indeed to the balance sheet by revaluing or by the net of purchase & sale at the end of the year. I'm more confused at the end of that sentence than I was in the beginning, I think we need the divine intervention of Mrs Freedom.

freedominacup

kowtow wrote: »

then why subtract the closing stock value from the net purchases / sales?

What you describe appears - to me - to be the same as stock in trade, i.e. pampers in a supermarket more or less, but I am no bookkeeper!

Edit: you can't break the rules of double entry, the ghost of Pacioli would turn in his grave.

Buy stock: credit the bank, debit the expense account OR credit the bank, debit the asset account - the *change* in stock value still makes it to the current (expense) account or indeed to the balance sheet by revaluing or by the net of purchase & sale at the end of the year. I'm more confused at the end of that sentence than I was in the beginning, I think we need the divine intervention of Mrs Freedom.

So do I. I'm already out on limb here. Anything further is going to direct from the source.

mf240

You spend 10 grand on stock. Your stock value increases by ten grand.

Its revenue neutral . The only exception is in the case of young farmers who qualify for stock relief.

mf240

I'm wrong. 25% stock relief available to all farmers.

https://www.agriculture.gov.ie/agri-foodindustry/agri-taxation/indicativelistofagri-taxmeasures/incometaxmeasures/

freedominacup

kowtow wrote: »

then why subtract the closing stock value from the net purchases / sales?

What you describe appears - to me - to be the same as stock in trade, i.e. pampers in a supermarket more or less, but I am no bookkeeper!

Edit: you can't break the rules of double entry, the ghost of Pacioli would turn in his grave.

Buy stock: credit the bank, debit the expense account OR credit the bank, debit the asset account - the *change* in stock value still makes it to the current (expense) account or indeed to the balance sheet by revaluing or by the net of purchase & sale at the end of the year. I'm more confused at the end of that sentence than I was in the beginning, I think we need the divine intervention of Mrs Freedom.

Yes if you want to think of this in double entry terms you buy stock : credit bank and debit purchases (expense). This purchase has increased your stock so the double entry for this is debit the stock (current asset) in balance sheet and credit the closing stock in the trading alc. This effectively offsets the purchase expense incurred and has a zero effect on your overall profit in relation to this transaction. Hope this helps. Mrs Freedom

mf240

freedominacup wrote: »

Yes if you want to think of this in double entry terms you buy stock : credit bank and debit purchases (expense). This purchase has increased your stock so the double entry for this is debit the stock (current asset) in balance sheet and credit the closing stock in the trading alc. This effectively offsets the purchase expense incurred and has a zero effect on your overall profit in relation to this transaction. Hope this helps. Mrs Freedom

This accounting is tricky. No wonder Michael Noonan is so pale looking

kowtow

mf240 wrote:

This accounting is tricky. No wonder Michael Noonan is so pale looking

He'd never make it in the markets.

He's all smoke and no mirrors.

alps

One thing is clear to me....

If it's a company with no fixed address.....It doesn't have to pay tax anywhere....


That's why the travellers get away with it....The same deal as Apple. ..