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  • #995186
    ibz
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    hi we have a small business, we do some retail however mostly hiring out equipment. In doing our tax we need to account for opening stock, purchases and closing stock. (I understand the simplified trading stock whereby we don’t need to change it if it is less then $5k)

    This FY we purchased $15k worth of stock, some of it sold off but the majority is retained to be hired out to customers.

    Anyone have any ideas on accounting for this with opening/closing stocks

    #1200486
    Dave Gillen – Former FS Concierge
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    Hi and welcome to Flying Solo! We have some knowledgeable accountants around the place, so I’m sure one of them will pop in to help you out.

    Great to have you here. :)

    Dave

    #1200487
    Anonymous
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    Your purchases need to be broken into two asset categories. Items you intend to sell is put into Inventory and items you will hire into something like Hire Equipment. You don’t count the Hire Equipment as stock because it is for hiring, you should be recording the hire payments received as separate revenue to sales.

    For your Cost of Goods Sold it would be:

    Opening Inventory 1 July 2015 + Inventory Purchases + Other Expenses getting the Inventory (Freight Paid, Delivery Insurance etc) – Closing Inventory 30 June 2016.

    You might find your actual difference for trading stock (Opening Inventory – Closing Inventory) was no more than $5,000, so you can use simplified method and use the Opening Inventory value. A higher Closing Inventory value isn’t considered an expense till sold but as an asset purchase, it stops people buying a ton of stuff before end of year to increase expenses. So the net result even if you count Hire Equipment purchases as Inventory you wouldn’t get any difference overall except probably not be able to use the simplified method.

    Normally the Hire Equipment purchase may not be fully deductible as an expense but at the moment you can write-off any asset purchase under $20,000 (till 30 June 2017) so if you want to claim all the Hire Equipment purchases as an expense you can. Usually for an asset over $1,000 (usual instant write-off maximum) you would have to depreciate it to get a tax deductible expense.

    Depending on your business profit it can be worth writing it off to get a lower taxable income or keep it as an asset to depreciate in the future if you foresee making larger profits.

    Not an accountant so could be totally wrong.

    #1200488
    ibz
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    Smb, post: 237503, member: 79633 wrote:
    Your purchases need to be broken into two asset categories. Items you intend to sell is put into Inventory and items you will hire into something like Hire Equipment. You don’t count the Hire Equipment as stock because it is for hiring, you should be recording the hire payments received as separate revenue to sales.

    For your Cost of Goods Sold it would be:

    Opening Inventory 1 July 2015 + Inventory Purchases + Other Expenses getting the Inventory (Freight Paid, Delivery Insurance etc) – Closing Inventory 30 June 2016.

    You might find your actual difference for trading stock (Opening Inventory – Closing Inventory) was no more than $5,000, so you can use simplified method and use the Opening Inventory value. A higher Closing Inventory value isn’t considered an expense till sold but as an asset purchase, it stops people buying a ton of stuff before end of year to increase expenses. So the net result even if you count Hire Equipment purchases as Inventory you wouldn’t get any difference overall except probably not be able to use the simplified method.

    Normally the Hire Equipment purchase may not be fully deductible as an expense but at the moment you can write-off any asset purchase under $20,000 (till 30 June 2017) so if you want to claim all the Hire Equipment purchases as an expense you can. Usually for an asset over $1,000 (usual instant write-off maximum) you would have to depreciate it to get a tax deductible expense.

    Depending on your business profit it can be worth writing it off to get a lower taxable income or keep it as an asset to depreciate in the future if you foresee making larger profits.

    Not an accountant so could be totally wrong.
    Thank you for your response!

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