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Annual accounts planning pays off 12 Feb 2015

When you're preparing material for your annual accounts, the best guide is our questionnaire.

Please answer all questions. If you're unsure of the answers, mark these questions and contact us so we can explain what's needed. Sometimes you'll have to supply us with a list of expenses, such as details to calculate your business use of home calculation.

If you put any of this information on another piece of paper, instead of in the questionnaire, please show a reference in the questionnaire so we can readily find your figures.

Some clients supply more information than we need. This often leads to extra work and extra costs. Our questionnaire should be your guide. Stick to it. If you think other information would be useful, keep it apart from what we have asked for and discuss it with us. We’ll tell you what to leave out next time.

Other things to remember

If you need to keep a log book to determine the private share of running costs, it has to be for a three-month representative period. Check to see when you last did a log. Inland Revenue requires you to complete a new one every three years, or more often, if the percentage of private running changes by more than 20%. When did you last do your log book?

Write off bad debts from the books BEFORE balance date. Your write off must be in some written form.  You should include a date as proof you wrote the amount off in time.

Check to see all staff have completed an IR 330. This is needed only once.

If you have a company car, the company needs to pay fringe benefit tax (FBT) for your private use or we make an adjustment for this. You can reduce FBT for every complete day that it cannot be available for private use, such as while you're overseas or if the car is being repaired.

FBT is usually calculated based on 20% of cost price. Once you've had a car for more than five years, you can switch to 36% of “tax book value”. It pays to make the switch for all cars costing more than $15,000.

Stock take

If the total value of stock is greater than $10,000, you need to count your stock at balance date. This can be a big job for retailers and often has to be done a few days either side of the date. Make sure you have systems to cope with stock arriving and stock sold between the time of counting and the actual balance date.

Watch out for payments made in advance. If the stock hasn’t arrived, the amount paid in advance may not be an expense. You may need to adjust for this. It will depend on the terms. If it is an expense, include it in stock.

Some businesses, such as builders, also have partly completed work. Value this at the direct costs of materials, labour and any other processing costs. Don’t include your profit.

Money owing to you (debtors or accounts receivable)

Watch out for work you have done before balance date but been paid for after balance date. If you get paid once a month, your April payment (March balance date) is probably for work done in March. This money forms part of your income for 31 March 2015.

Donations

You can claim for most charitable donations you've made by completing the IR 526 form. If these donations are made through a limited company, they are tax deductible, provided the company doesn't make a loss.

Entertainment

You’ll need to identify entertainment expenses separately as they're generally only 50% deductible. Gifts of food and wine made to customers or suppliers are not entertainment and, so long as they're made in the normal course of your business, they are fully tax deductible and don’t need to be identified separately.

ACC

Employers get two bills a year, one for staff and one for themselves. It pays to check the bills as mistakes occur. If you have a high income and some is PAYE income, you could find you're paying premiums on total earnings above the maximum income threshold of $118,191.

Bank accounts

We need evidence of all bank balances at balance date. Banks often wait until statements are full before sending them out. This is no good to us. Insist that your bank sends you a statement at the end of each financial year for ALL accounts. This includes mortgages and loans.

Bank printouts taken off the internet might not be a good substitute. Sometimes they have to be read from the bottom upwards. Also, some banks show only the bank balance at the date of printing and not at 31 March.

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Contact info

Level 3
CSC House
111 Customhouse Quay
Wellington

T: 04 499 3903
F: 04 499 3913
E: info@pgpaccounting.co.nz