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Readers’ forum: Accounting for stock

02 February 2021
Issue: 4778 / Categories: Forum & Feedback
Which year should costs of stock be claimed?

A friend and I have both been sole traders for many years and are ready to start a business partnership together.

I have always prepared my own accounts and tax returns in the past. When I was trading by myself I calculated how much of my stock related to that year’s sales and then adjusted the cost so that I did not claim this as an expense until the stock was sold. Can I use the same process for the partnership?

Alternatively can I work on a pure cash basis and simply claim the whole of the cost of stock in the year of purchase against cash sales received in the same year? Potentially I suppose this would depress the first year’s taxable profits but increase the taxable amount in future years.

That said we may continue to buy stock in similar quantities in...

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