What exactly is turnover?

[andy thomas]

On Sun, 15 Jan 2006, Ken Wilson wrote:

> Cash accounting is based on when the money moves.
>
> Accrual accounting is based on when the transaction occurs, eg invoice sent, 
> rather than when the money is recieved.
>
> In Australia small businesses can use cash or accural accounting, large 
> companies must use accrual accounting.

I use accrual accounting as we are also VAT registered, so it seemed to 
make sense for the invoice dates on the VAT books to match those in the 
sales account. Also, most customers pay up fairly promptly so there isn't 
much of a delay between an invoice being raised and the money hitting the 
bank.

> So it depends on which method of accounting you are using, and I have no idea 
> about UK tax law.

Thanks for your help - I'll stick to our accrual accounting scheme and 
state the turnover as what we should have received, with the two 
non-payers appearing as bad debts. I expect they will pay eventually and 
this can be accounted for in the next tax year.

> IANAA

Nor me!

cheers,

Andy

> andy thomas wrote:
>> 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
>> 
>> ...applying the glue that holds it together
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