Idiot’s Guide - assets and liabilities help please

[Dibble]

Good afternoon

I’m struggling to find anything on the HMRC website as to what would constitute assets or liabilities for small business (one employee/owner/director, all the same person). Can anyone point me in the right direction, either online, or suggest what they might be?

It’s not for me, I’m trying to assist and I’m struggling to get my head round it. I know professional, paid help,such as accountants are available, but I’m just trying to get my head round the basics for filing a small business tax return and company accounts.

Thanks.

[anonymous-user]

Examples
Assets
Cash
Stock
Property
Cash owed to you on an invoice or on a loan made to a third party

Liabilities
Loans or overdrafts
Invoices received but not paid

Just intended as examples, not an exhaustive list.

[Dibble]

desolate said:

Examples
Assets
Cash
Stock
Property
Cash owed to you on an invoice or on a loan made to a third party

Liabilities
Loans or overdrafts
Invoices received but not paid

Just intended as examples, not an exhaustive list.

Thanks, that’s at least a starter for ten and I appreciate it.

Would assets cover office stuff, such as desk/chair/fridge, etc, necessary for use in the course of the business? Things like analytical equipment, microscopes and the like? Do the assets have to be completely specific to the business, such as a microscope, or can they be more general, such as chair, desk, etc?

[anonymous-user]

Dibble said:

Thanks, that’s at least a starter for ten and I appreciate it.

Would assets cover office stuff, such as desk/chair/fridge, etc, necessary for use in the course of the business? Things like analytical equipment, microscopes and the like? Do the assets have to be completely specific to the business, such as a microscope, or can they be more general, such as chair, desk, etc?

They are all assets.

However to provide a true reflection their vakue to be depreciated (or is it amortised) over their useful life.

If you are looking into the accounts of a company that needs to consider stuff like that they should have an accountant really.

A half decent account need not be expensive and will save you money in spades.

[Dibble]

desolate said:

Dibble said:

Thanks, that’s at least a starter for ten and I appreciate it.

Would assets cover office stuff, such as desk/chair/fridge, etc, necessary for use in the course of the business? Things like analytical equipment, microscopes and the like? Do the assets have to be completely specific to the business, such as a microscope, or can they be more general, such as chair, desk, etc?

They are all assets.h

However to provide a true reflection their vakue to be depreciated (or is it amortised) over their useful life.

If you are looking into the accounts of a company that needs to consider stuff like that they should have an accountant really.

A half decent account need not be expensive and will save you money in spades.

Many thanks and you are absolutely right. It’s finding a decent one for a particular field that is the issue at present! It’s not an unusual business by any stretch of the imagination, but ideally, it would be preferred if one with experience in that industry was used, rather than a “general” accountant.

I realise that may be (hopefully only slightly) more expensive in the long run, but the flip side would ideally be knowing the ins and outs of that industry a little better.

Thanks again for your time and help, it’s much appreciated.

[anonymous-user]

If you post up the industry and the area, I am sure someone will have some ideas.

[Eric Mc]

What is so special and peculiar about your business that an accountant in practice would find difficult to understand?

Practising accountants look after clients who run all sorts of diverse businesses. You should at least talk to one. Even the least technically minded accountant will have a pretty clear idea of what constitutes the assets and liabilities of a business.

[Dibble]

desolate, Eric, thanks for the replies.

I realise it’s all a bit “cloak and dagger”! The field itself isn’t particularly unusual but I’d rather not go into more detail for now - I appreciate that makes getting advice more difficult, but it was just an idea I was after initially of assets/liabilities. I realise that to those involved in this field, it will no doubt be simple and obvious, but it’s not something I’ve any experience of, hence me asking here as I know PH can be a mine of useful information.

Without going into more detail, it’s felt that an accountant with experience in the relevant industry would be able to give better service/advice. I guess it’s the equivalent of taking a TVR to a TVR specialist, rather than a “general” garage, to keep it “PH”.

[Eric Mc]

But what "special knowledge" would the accountant need?

The principles behind what constitutes assets and liabilities in accounting are completely the same for all types of businesses - whether you are a sweet shop or build nuclear subs.

I don't understand why you think that you need some sort of "specialist" accountant.

[anonymous-user]

Dibble said:

Without going into more detail, it’s felt that an accountant with experience in the relevant industry would be able to give better service/advice. I guess it’s the equivalent of taking a TVR to a TVR specialist, rather than a “general” garage, to keep it “PH”.

In my experience, an accountant rarely "understands" their client's business in the way your post implies.

Sure, they can see the basic like gross margin, costs etc and they can all produce the necessary reports and calculations.

But understanding a business means knowing things like where a business finds its leads, how it converts those leads into customers, how to fulfil the promised product or service etc etc. Your accountant won't really be interested in those aspects as it doesn't usually fall within their remit.

[MOBB]

Eric Mc said:

But what "special knowledge" would the accountant need?

The principles behind what constitutes assets and liabilities in accounting are completely the same for all types of businesses - whether you are a sweet shop or build nuclear subs.

I don't understand why you think that you need some sort of "specialist" accountant.

+1

[Countdown]

EddieSteadyGo said:

Dibble said:

Without going into more detail, it’s felt that an accountant with experience in the relevant industry would be able to give better service/advice. I guess it’s the equivalent of taking a TVR to a TVR specialist, rather than a “general” garage, to keep it “PH”.

In my experience, an accountant rarely "understands" their client's business in the way your post implies.

Sure, they can see the basic like gross margin, costs etc and they can all produce the necessary reports and calculations.

But understanding a business means knowing things like where a business finds its leads, how it converts those leads into customers, how to fulfil the promised product or service etc etc. Your accountant won't really be interested in those aspects as it doesn't usually fall within their remit.

I’d argue that a decent FD of any SME [b]would[/b} understand all that.

[anonymous-user]

I read this, and I think “Ahh. He wants an accountant that will draw some accounts that show what the directors would like their company’s accounts to say, not what accounting standards require the accounts to say”.

[anonymous-user]

Countdown said:

I’d argue that a decent FD of any SME [b]would[/b} understand all that.

I agree; a good FD would. But their position is a bit more integrated than a regular, subcontracted, accountancy service, which I believe is what the OP is referring to.

[Countdown]

EddieSteadyGo said:

I agree; a good FD would. But their position is a bit more integrated than a regular, subcontracted, accountancy service, which I believe is what the OP is referring to.

Agreed. It seems that the OP wants a “generalist” Accountant who is also a “specialist” in his particular industry].

[anonymous-user]

Countdown said:

Agreed. It seems that the OP wants a “generalist” Accountant who is also a “specialist” in his particular industry].

Yep. TBH, I don't really think he know what he wants, based on the type of questions he is asking.

[anonymous-user]

Unless the industry needs some knowledge of specific regulations that relate to the finances e.g. banking wrt reserves / accounting for exotic derivatives for instance, then I don’t think an industry specialist accountant really matters.

As others have said, in a situation where the business is seeking advice from someone who doesn’t know an asset from a liability, any accountant would be a step forwards wouldn’t it?

[Dibble]

There’s nothing underhand being asked and I apologise for not going into greater detail about type of business.

I may be wrong about an accountant with an idea of the industry being “better”, hence me trying to illustrate what I meant with the “TVR” analogy.

It’s a one person band, with a small turnover/profit, underwhelmed with the service provided to date with the current accountant and potentially left a bit in the lurch by them. Due to a number of other factors (time of year, looking after me while I’m repeatedly in and out of hospital, running the business) it’s a bit of a “perfect storm”.

I understand the best advice (even in general terms) can only be given with detail provided in the question. I’m not an accountant and I’m not trying to pull a fast one or anything like that. If the consensus is that for a small business a “specialist” accountant wouldn’t provide anything over and above what any decent accountant would, I’m happy with that.

The accounts just need to be accurate, nothing more and certainly not misrepresented. We’d like to know what assets and liabilities are, for example, hence the OP. There is no financial director or department.

[Countdown]

Based on what you're saying an Accountant in "Practice" would be fine.

Another option would be to consider using one of the larger (National) Practices. They will have enough staff on the books to provide the standard "accountancy" stuff that any business needs but they might also have an Accountant who deals with other clients working in your specific industry. Or they will be able to provide general Business/Management Consultancy advice to fill in any gaps left by the Accountant.

In short - if you're looking for more Financial support than a "one-man band" Accountant can provide, but you're not big enough to have your own in-house Accountant then try a larger firm of Accountants. They can usually provide the whole gamut of services. For a price.

ETA : the questions you've asked above i would expect to be answerable by a first year ACCA student... (or somebody who's FCMA )

Edited by Countdown on Saturday 12th January 22:38

[anonymous-user]

Dibble, is your question who owns what as between the company and the sole director/employee/shareholder?