What exactly is turnover?

andy thomas andy at netstat-a.net
Sat Jan 14 15:28:50 EST 2006


Just a general accounting query regarding the exact definition of the term 
"turnover"; as I understand it, turnover is the total amount of money 
flowing into a company over a given period before expenses, taxes, etc are 
deducted. But is it:

 	a) the sum total of the invoices a company has raised in
 	   that period for the work it has done?

     or	b) the sum total total of monies actually paid to the company in
 	   that period?


Or to put it another way, supposing a company undertakes 10000 UK pounds 
worth of work in a financial year and sends invoices totalling 10000 ukp 
out to its customers but only actually receives 9000 ukp in payment during 
that period - what is the turnover, 10000 ukp or 9000 ukp?

I only ask this because I'm currently faced with a UK Inland Revenue 
partnership tax return where two invoices we raised in the 2004/2005 tax 
year still haven't been paid. Omitting these unpaid invoices from the 
turnover total means the bank balance then tallies with the apparent 
turnover although to complicate things further, we have already paid the 
VAT on these two bad debts as UK VAT rules require tax to be paid when the 
invoice is raised, not when the customer actually pays us.

Any suggestions would be gratefully received as I've been stumped by this 
definition of turnover.

cheers,

Andy

-------------------------------------------
Andy Thomas,
netstat -a llp

Tel: +44 (0)7815 060872
Fax: +44 (0)20 8372 2582
http://www.netstat-a.net

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