Cash to accrual accounting - stock

[Paulwk1972]

I’m currently filling in my tax returns using the cash basis accounting method, but may have to move to the accrual method next year.

Currently, I do not need to account for stock but obviously would need to on accrual accounting.

When it comes to the new tax year - if I’m then on the accrual method - do I just enter the opening stock balance (of whatever it is at that time) as a starting point?

Or do I actually set an opening stock of £0, even though I have stock?

[cbstephensaca]

You will have to make an adjustment for your opening stock, otherwise your cost of goods sold figure will be incorrect next year. Essentially, you have claimed as an expense items you have purchased but are still holding in stock.
Under accrual accounting you don’t charge the expense until you sell the goods.
Therefore you will need to reduce purchases by the amount of your opening stock at the date you switch methods.

You will also need to make adjustments for any invoices you either issued or received before the date you switch, but that hadn’t been paid by then.

[Paulwk1972]

Thanks, that’s helpful.

I think I understand what you mean so let’s say I enter 10k opening stock in QF for example at start of 21/22 tax year, then when I file my tax return for 21/22, I adjust purchases down by 10k, is that correct?

What’s the best way to record this adjustment in QF?

Would I be able to spread any extra tax due to this adjustment over 6 years like you can with adjustments made due to invoices issued in final cash year but not paid until first accruals year?

[rhc]

Hi Paulwk1972,
I think your questions are questions for your accountant. Your accountant knows your situation and books best, and should be able to handle your way from cash to accrual. The forum here is more about quickfile itself and how to work with it.
Sorry, that it is not what you were looking for.