Instant Quote
Call Me Back

News,May 2018

business asset disposal relief

Business Asset Disposal Relief – Guide for Beginners!

22/10/2021Business , Finance

The Entrepreneurs’ Relief has been renamed Business Asset Disposal Relief (BADR) since March 2020. It minimises the capital gains tax rate to 10 percent on shares. This makes the United Kingdom tax heaven for business persons. So, if your looking for a significant source to know about BADR, you just have found the right source. We will let you know about: What is BADR, and who is eligible for it? What are the rules of BADR? How much and How to claim BADR? So, let’s start!   Our tax professionals can assess your situation and let you know where you stand. We suggest improvements (if needed) that will get you closer to meeting the Business Assets Disposal Relief requirements. Contact us now!   What is Business Asset Disposal Relief (BADR)? When the business owners dispose of relevant assets of their business, a BADR is a valuable CGT relief that is available to them. It is an important area of tax planning, and it can minimise the tax rate on the first £1 million of eligible capital gains to 10 percent. Many business owners should confirm their eligibility for it as a part of their exit planning.   What are the BADR Rules? The rules for business asset disposal relief are as follows: There should be some proof of working in the company (no minimum hours or salary requirements). Non-executive directors & secretaries of the company will be counted as officers. A document employment contract provides evidence of employment and will help you if HM Revenue & Customs challenges your claim.   Who is Eligible for Business Asset Disposal Relief? It is usually available to: Company directors and employees at the time of disposal of shares in their personal trading enterprise. Trustees when making disposal of their company assets, in certain cases. Company employees and directors who sell qualified shareholdings that are earned under an EMI (enterprise management incentive) share option scheme. Sole traders or partners at the time of selling the entire or part of their trading enterprises.   How Much BADR Can you Claim? Business Asset Disposal Relief is available for qualifying gains up to the lifetime threshold that is applied when making disposal. For qualified disposals made on or after (March 11, 2020), the lifetime threshold was minimised to £1 million. If you surpass the lifetime limit, then excess gains will be taxed at the usual rate of capital gains tax (CGT).   Turn to CruseBurke for managing and recording finances and for claiming BADR! We have a team of skilled accountants who will handle everything with HMRC on your behalf. Contact us right away!   How do you Claim BADR? You must claim the BADR to HM Revenue & Customs for the year in which gain arises. It must be claimed by the first anniversary of (January 31) following the tax year of disposal. If you fail to do so, then you will not be eligible for business asset disposal relief. For BADR, you can claim via a Self-Assessment tax return. You can also claim by making a standalone claim, and usually, most claims are made on personal tax returns.   Conclusion We will conclude our blog by saying that a business asset disposal relief is not automatic; you have to claim it at the right time mentioned above. Otherwise, you will not qualify for this relief. Therefore, to be on the safe side, it is better to hire a professional for claiming BADR tax relief on your behalf.   Looking for a professional to claim BADR? Then, feel free to contact us! We are a team of professionals that will handle everything with HMRC on your behalf and help you claim what is rightfully yours! So, contact us right away!  

Read more
Chart of Accounts

Chart of Accounts – A Basic Guide!

21/10/2021Accounting , Business , Limited Company

You are required to set up the chart of accounts (COA) in case you are taking over bookkeeping in your new company. If you do it rightly, your other tasks will be too easier to manage. The foundation of accounting is bookkeeping, and the initial step to managing your accounts correctly is “setting up the chart of accounts.” It may be challenging to keep a record of your business incomings and outgoings. But, it is important to understand the basics of COA for those who want to know their cash flow and the overall financial position of their company. Therefore, this blog will let you know about COA, its structure, and its importance. So, let’s explore the details! At CruseBurke, we have a team of limited company accountants to prepare and file your company’s accounts at a reasonable rate. Reach out to us now! What is a Chart of Accounts? The COA contains the list of the company’s financial accounts in the general ledger of your company. It permits you to divide all your business transactions made during a particular time into various subcategories. A COA permits you to get an insight into your business’s different areas by separating your income, expenses, assets, and liabilities that are shown in the following infographics.   What is the Structure of COA? The list splits all the company accounts by the following: Where do the accounts belong either in equity, assets, or liabilities What financial statement do the accounts go to, either in BS (balance sheet) or income statement? In order to meet the certain needs of your company, this can be further subdivided. The following is included in the charts of accounts: Company Assets: The company assets can consist of the following: Allowance for doubtful accounts Petty cash Accounts receivable Marketable securities Cash Prepaid expenses Accumulated depreciation, etc. Inventory Fixed assets Company Liabilities: The company liabilities may include the following: Accounts payable Taxes payable Notes payable, etc. Accrued liabilities Wages payable Shareholders’ Equity: The equity of a shareholder include: Capital (cash invested by the owner in the company) Drawings ( cash withdrawn by the owner for personal use) Company Income/Revenue: The following can be included in the revenue of the company: 1. Income/Revenue 2. Sales returns and allowances Company Expenses: The following can be included in company expenses. COGS (Costs of goods sold) Depreciation Payroll tax Supplies Utilities, etc. Bank fees Advertising Rent Wages Don’t have the time to manage your business finances! Be worry-free and rely on CruseBurke to handle your business finances in the best possible way.  An Example of a Chart of Accounts The following partial listing represents the distribution of accounts in a COA. The gap between the account numbers allows for future accounts additions.   How is a COA Used in an Accounting Software? An accounting software deals with the five core accounts (assets, liabilities, equity, revenue, and expenses). They are similar for every company. However, the categories that comes below them in a COA can be customised to fit your company.  For instance, for sales revenue, you can create many accounts. One for every area you deal in, or one for each company department. Your accounting software can ask you where to record the opposing credit or debit at the time of entering any transaction into it. You can also instruct the software to make the opposing entry for you, automatically. How to Deal with a COA? The following are the tips to deal with a chart of accounts. Make changes timely – It is better to make changes at the end of the accounting year, as adding accounts is easy at any time, but deleting any creates problems. Keep the COA consistent – Try to consider the comprehensive COA’ structure for your new business in order to keep your accounts organised, right from the start. This will help you to compare the accounting date for the future. Go on optimising your COA – Don’t be afraid to fix the structure of your COA, if it has become inconvenient. And for better bookkeeping, you are required to add other types of accounts. Quick Sum Up We hope now you have understood what is a chart of accounts, its structure, and how to deal with it. We would sum up our discussion by saying that it is essential to know COA basics for those who are setting up a new business. This is because managing your company accounts well can grow your business. Therefore, it is preferable to consult a skilled accountant to set up your COA for your new company. Unable to set up a chart of accounts for your new business? Let us handle this! We are skilled chartered accounts that can manage your business accounts in no time, at an affordable price, and we’ll grow your business like never before! So, contact us right away! Disclaimer: This blog contains general information on a COA.

Read more
what is a close company

What is a Close Company – A Basic Guide!

20/10/2021Business , Limited Company

Within the United Kingdom, the term close company is totally different from closing the company, and it solely impacts private limited corporations. This term does not affect LLP or sole traders. A close company consists of participators that are less than or equal to five. Therefore, to know more about what is a close company and participators, read this blog till the end. Looking for expert advice, get in touch with our Limited Company Accountants now! What is a Close Company? It is a private limited company that is privately possessed & controlled by participators that are less than or equal to five. Many small companies within the United Kingdom are close companies because they generally have one or two participators. What Are Participators? It is a person who has a financial interest in the private limited company in terms of: Rights to the capital on winding up or closing the company. Share capital of the company. Voting rights in the meetings. The examples of participators are as follows: Director of a company Shareholder of a company A business loan creditor. Where a Company Can Not Be Close HM Revenue & Customs has specified rules where a company can not be classified as a close company. The rules are as follows: The company is controlled by one or more open companies under any of the control tests (CTM60210 to CTM60250). The company can not be termed a close company under the winding-up test in CTM60320 or control test in (CTM60210 to CTM60250) unless it includes an open company in the group of participators that are equal to or less than five. Only the control test in ICTA88/S416 (2)(c), can show that the company is close. Under the control test, the company would not be classified as a close company in case the reference to participators in Section 416(2)(c) does not include the business loan creditors that are open companies. Publicly Traded Vs. Closed Companies The close companies get less attention as compared to the publicly traded companies. The publicly traded companies garner more attention due to their listed status & reporting requirements, e.g., annual reports. Whereas close companies do not have many burdens of reporting, that is why they have less obligation to transparency. They do not have to publish their financial statements. Corporation Tax Rules for Close Companies Whenever it comes to corporation tax, many close companies can benefit from the starting rates or small businesses. But if it is a close investment company, you have to pay the full amount of corporation tax regardless of your profit levels. Are you tired of taxation problems? Then, let us handle it! The Bottom Line: Now that you know what is a close company, we can sum up the discussion by saying that close companies and closing a company are two different terms. Do not consider them the same. Close companies are the companies that are owned and run by five or less than five participants. However, before considering yourself a close company, read the rules as mentioned above carefully, laid down by HMRC, or consult a professional regarding this. We’ve chartered accountants in Corydon who specialise in offering affordable accounting and taxation services for private limited companies (including close companies), property owners, and self-employed professionals. Get in touch with us today! Disclaimer: This article intends to provide general information based on a close company.

Read more
How does Crowdfunding work? It is a way to quickly raise large sums of capital from various lenders, customers, or investors, Learn more

What is Crowdfunding and How Does It Work?

14/10/2021Budgets & Other , Business , Finance

The crowdfunding platforms provide small businesses a way to quickly raise large sums of capital from various minority lenders, customers, or investors in a short period of time. This type of fundraising is becoming more popular, and it is being utilised to fund not only businesses but also creative projects, social movements, etc. Therefore, in this blog, you will know how does crowdfunding work and its further details. Manage your business finances with CruseBurke. Just let us know your need for affordable financial services tailored to your business needs! What is Crowdfunding & What are its types? It is a way to raise capital. You ask for money from a lot of people at once, often through the internet. You will have to decide on a target amount and pitch your next project or business information to your potential crowd of investors. Then raise the entire amount of money to proceed. Types of Crowdfunding The following are different types of it. 1) Loan-Based Crowdfunding In this, the amount of money is lent to your company at an interest rate, which is fixed. 2) Investment-Based Crowdfunding In this type of crowdfunding, people invest in your company for a share in return. 3) Donation-Based Crowdfunding In this, people contribute to your charity in exchange for something promised in return. 4) Reward-Based Crowdfunding In exchange for a person’s investment, you give a reward generally related to the project you are promoting. How Does Crowdfunding Work? In order to register your project, you will generally utilise a crowdfunding website online to register your project and start raising the money. Some of the popular websites are stated below.   After choosing the site, you will have to register your project. Keep in mind that along with registering, you are informing your audience about yourself, like what you want to achieve and why does the audience investment is too valuable. Hit Your Target When your campaign is up and running, then it’s time to advertise it on your email list, social media, and anywhere else where you have an interested audience. Tell them details about how their donation is going to assist you in improving your business for them. Keep your audience updated about the ongoing process of fundraising and maintain enthusiasm. Key takeaway: Most of the platforms or websites take an approach (all-or-nothing), which means no money will be paid to you if you do not hit your target. Therefore it is important to go all out on your other websites 0r platforms in order to raise awareness. Where is the Money? As long as the campaign is within the time period set from the beginning, your investors can not pledge money at any stage of your campaign. But once it is not within the timeframe, the investors can commit the funds at any point. Once you reach your target and the campaign ends, your crowdfunding website or platform will deduct a percentage from the total amount of money raised. When planning your crowdfunding campaigns, you may also have to consider tax obligations. For instance, investment and reward-based crowdfunding is generally categorised as revenue and can be liable to revenue and sales tax. CruseBurke has a team of accountants to provide affordable financial services for you. Feel free to reach out! Do I Need to Payback Crowdfunding? It is based on the type of crowdfunding you are going for. For example, with reward and donation-based crowdfunding, people invest for various reasons, usually through social or personal motivation. But, it is not for heavy financial gain. In loan-based crowdfunding, the investors, often with interest, receive their amount back. And, in investment-based crowdfunding, people generally invest money for your company share. Therefore, they will see the rise and fall of the value of their shares. But, you will not have to pay them back. Conclusion Now that you know how does crowdfunding works, you must also know the harsh facts of crowdfunding. You have established high public expectations, so missing promised deadlines or failing to meet their expectations will irritate people. In addition to that, you can have bad publicity. The smart strategy is to stay engaged with your audience and share your journey with them. If your audience is aware of your challenges, they will forgive a lot of things. It is always advisable to get help from a financial advisor to flourish your business. So what’re you waiting for. Contact our financial advisor to skyrocket your business growth! Disclaimer: This article intends to provide general information on how does crowdfunding work.

Read more
how overdrafts work

How Overdraft Works: Types, Limits, Costs & Advantages

11/10/2021Business , Finance

In case you need to pay unexpected expenses, an overdraft may be a thoughtful way of borrowing money from your bank in the short term. However, before using an overdraft, you should be aware of everything associated with it. Understanding the advantages and disadvantages of an overdraft can assist you in minimising, and even avoiding paying interest. Therefore, this blog will let you know what an overdraft is, how overdraft works, and its advantages and drawbacks. So, let’s start! We provide cost-effective accounting, taxation, and payroll services at affordable prices. Contact us today! What is an Overdraft? It is a short-term financial loan that permits you to receive a credit facility (temporary) when your account balance goes below zero. You usually get an overdraft on your current account that is based on your credit history. If your bank provides you with an overdraft, it provides the facility to spend more cash than you have (in a bank account). In addition, it is a debt that you need to pay back to the bank along with the interest or fees. Some banks automatically provide you with an overdraft facility, whereas many of them require a proper application for it. For instance, if you have no remaining money in your account and you spend £40. In this case, your balance would be – £40. This implies that you are utilising an overdraft. How Overdraft Works? The following are the two types of overdraft. 1) Arranged Overdraft These overdrafts are arranged in advance. In this type of overdraft, you agree on a limit at the time of account opening with your bank. Then, you can only spend money up to that agreed-upon limit. 2) Unarranged Overdraft These overdrafts are not pre-agreed. This can be because you spend more money than you have without agreeing upon any overdraft limit with the bank. This also happens when you have crossed the limit of your arranged overdraft. So, suppose you’re already aware of the fact that you’re going to land on an unarranged overdraft. In that case, you may contact your bank beforehand to arrange or extend a temporary arranged overdraft. Furthermore, unarranged overdrafts can result in declined transactions or higher charges. It’s always better to arrange an overdraft in advance if you think you’ll need one. The Advantages and Drawbacks of Overdrafts Go through the advantages and disadvantages of overdrafts before using one.     What is the Limit of an Overdraft? Your overdraft limit depends on multiple factors. It does not merely depend on the type of bank account you use. High-scale banks, for instance, do not provide this service. Furthermore, small and medium-sized banks also don’t provide this service to persons new to credit, have filed for bankruptcy, or have an IVA. If your bank provides you with an overdraft facility, you may not always be able to utilise it because it solely depends on the bank’s discretion and is subject to status. Your bank will evaluate your creditworthiness, time, age, incomes, and credit ratings, among other things, when you apply for an overdraft. After the inspection, your bank will allow you to use this facility as needed. What will be the Cost of Overdraft? The overdrafts fees and charges vary from bank to bank. If you have a current account and use an overdraft frequently, you should evaluate the fees and charges of the other bank before switching. You can calculate other banks’ charges by using the current charges of your overdraft. Many factors must be considered before making a final decision, as a low-cost option may turn out to be an expensive mistake in the long term. Furthermore, some banks offer this facility without any interest charges and with minimal service fees. Conclusion Now that you know how overdraft works. We will conclude our blog by saying that your bank will allow you to utilise the overdraft limit of your current account, but you need to keep an eye on all possibilities to avoid paying higher interest rates and costs. To be on the safe side, we recommend comparing the fees and interest rates of various banks. Additionally, if you use an overdraft frequently, you should consider other options such as personal loans, which are more effective, cost-effective, and have a longer repayment duration. Looking for expert financial advice! Look no further other than CruseBurke. We have a team of Certified Chartered Accountants in Corydon to handle your finances in the best way possible. Contact now! Disclaimer: This blog provides general information on how overdraft works.

Read more
Allotment of Shares

What is the Allotment of Shares & What are the Reasons for Issuing Shares?

04/10/2021Business , Business Growth Ideas , Limited Company

You may want to change your company’s share structure by adding a new shareholder, or changing the current percentage of shares between the shareholders; this is where the allotment of shares comes into play. In the allotment of shares, the company issues and allots shares to new or existing shareholders. The shares can be allotted to both individuals or corporate entities. But what is the reason for allotting shares? To know about it, read this blog till the end. Talk to one of our chartered accountants in Croydon about the online accountancy services we provide. We are just a click away! If you are confused about the process of shares allotment and you want an expert service for it, then feel free to contact us! What is the Allotment of Shares? By the company, the process of issuing shares and then allotting them to new or existing shareholders is known as the allotment of the shares. New Shares are usually allotted when new business partners are introduced in the company. Most of the companies consider issuing and allotment of shares as the same thing because they follow the same procedure. But keep in mind that these two are different terms unless they follow a similar procedure. What are the Reasons for Issuing Shares? The main purpose of issuing shares is to raise funds for a business. Some of the essential reasons to issue new shares are as follows: For the repayment of the company’s borrowings. In order to raise funds for a company. To raise funds for development or for a new project. At the time of incorporation of a company. To raise funds to purchase a new company or a business. To repair the trade continuation and damaged balance sheet of small businesses at the time of financial crisis. When shares are granted by a business as a share option to employees or directors. When a senior employee becomes a director or a new director joins the company. The Process of Allotment of Shares To allot shares to the new shareholders, all the companies need to perform few specific steps. The following is the procedure for allotting shares.   1) Confirmation to Shareholders ID & Shareholdings It is mandatory to confirm the existing shareholdings, the shares you are proposing to introduce, and your shareholder’s final shareholding structure. The confirmation of the following details is necessary in order to allot a share to a new shareholder. Name Date of birth Relation with other shareholders Residential address Nationality Proof of the ID 2) Holding a Board Meeting To hold a board meeting is essential for shares allotment. The changes are required to be approved in the board meeting, after confirmation of the shareholder’s ID and shareholdings. The information regarding the shareholders and the revised share structure should be included in the minutes of the board meeting. And, it has to be kept secure in the records of a company. These details are then forwarded to the Companies House and they can be utilised as evidence during an audit. 3) Updating Companies House for New Shares Allotment After the allotment of the shares, the details are required to be reported to the Companies House within one month of allotment. This is done by completing & filling the statement of capital form (SH01). The form can be easily filled out on the website of Companies House. This form is utilised to update the share structure of a company to Companies House. The SH01 form is used to report the number and value of newly allotted shares to Companies House, but it does not include the names of shareholders — that is reported in the CS01 (Confirmation Statement). 4) Issuing of New Share Certificates According to the new share structure, the new share certificates are issued to the shareholders after updating the Companies House of the allotment of the new shares. The details about shareholdings are included in a share certificate. Moreover, the certificates that are issued previously will be cancelled automatically. 5) Updating the Company’s CS01 (Confirmation Statement) with New Share Totals Updating the CS01 with the Companies House is mandatory for you. The new share structure in the company will be displayed after updating it. In the company’s confirmation statement, you must include the details of a new shareholder. This is because the SH01 form does not contain any details that are related to a new shareholder. Quick Sum Up We hope now you have understood what is the allotment of shares, the reasons for issuing shares, and the process of share allotment. Go through the above-mentioned procedure while allotting shares. We recommend you consult with a chartered accountant as the process of issuing and allotting shares is quite technical without the help of a professional. CruseBurke provides an expert service for the allotment of shares, providing all the required minutes, forms, and documents with practical advice! So, contact us now!  Disclaimer: This article intends to provide general information on allotting shares.

Read more
Cash in hand work

Is Cash in Hand Work Illegal in the UK?

30/09/2021Business , Finance , Personal Tax

Accepting cash in hand work? If yes, then you should know how you’ll be taxed on it. The taxes will be based on your circumstances, for instance, whether you are a registered self-employed person or have a job. This blog will explain how HMRC reviews cash-in-hand work and what you must do in the most common situations. Are you having trouble registering as a self-employed person? We’ll get your self-employed business up and running at low cost and less time. So fill out this form right now to save time & money! What Exactly Is a Cash In Hand Work Payment? It refers to the payments, where an employer pays an employee or a contractor directly in cash, rather than through e-transfers or bank deposits. While the act of paying is not illegal, it can become problematic if it is used to avoid taxes and National Insurance Contributions (NICs), which adds up to tax evasion and is illegal. This method is used in industries like hospitality, construction, home care and domestic services as it can be used to pay daily or weekly wages to workers. But they must comply with HMRC’s PAYE regulations. Is Cash In Hand Work Illegal? The act of being paid in cash itself is not illegal in the UK. However, it becomes illegal when the income is not declared to HMRC to avoid paying taxes and National Insurance contributions. For cash in hand work to be legal, both employees and employers must meet their tax obligations. For employees: If the employer doesn’t use PAYE, the employee must register as self-employed with HMRC if they are self-employed. They must report cash earnings via Self Assessment. For employers: Businesses that pay cash must record the payments, provide payslips detailing deductions for tax and National Insurance, and pay those deductions to HMRC. Additionally, all employers must submit RTI reports to HMRC every time employees are paid. HMRC Side Hustle Crackdown In recent years, HMRC has been cracking down on individuals receiving cash in hand work payments as part of their side hustles. This HMRC side hustle crackdown is focused on ensuring that all income is properly declared to avoid tax evasion. If you are earning money through a side hustle, even if it’s cash in hand work, it must be reported to HMRC. Failing to declare this income can lead to significant penalties and fines. Benefits Of Cash In Hand Work Payments Cash in hand work payments include several benefits, some of which are described below: For Individuals Cash in hand work transactions carry a lower risk of data breaches and help identify fraud compared to digital payments, as there is no risk of check bounce. They do not leave a digital trail, thus helping in more privacy and security compared to electronic payments. Note: Privacy does not exempt workers or businesses from keeping proper records or declaring income to HMRC. They are straightforward, eliminating the need for complex electronic systems and avoiding the frustration of system crashes and internet or server connectivity issues. For Businesses Businesses have an advantage in this way, that can avoid high transaction costs charged by card issuers and banks, especially for smaller transactions by accepting cash payments. Cash can help provide a backup for electronic payment systems, as it works even during blackouts or power outages or when the digital networks are down. This can also help in immediate cash flows, where businesses can receive instant access to funds through cash transactions, and can be used for immediate operational needs. Disclaimer: These benefits relate to the medium of exchange (physical currency) and not the legality of payment for work. All income earned must still be declared to HMRC in the UK, regardless of whether it is paid by bank transfer or in cash, to comply with tax laws. Drawbacks Of Cash In Hand Work Payments Cash in hand work payments have various drawbacks or limitations, which can arise due to various reasons, like: Legal Risks If proper documentation is not done, cash in hand work payments could lead to tax compliance issues and various legal consequences. Lack of Tracking Physical cash payments do not automatically create digital records like card transactions, making them difficult to track. Moreover, it might lead to human error, making it harder to prove income to HMRC. Tax Compliance and Legal Issues It is illegal to fail to declare income to the tax authorities, including cash income. This can result in heavy penalties, fines and even imprisonment for individuals. What are Your Responsibilities When You Pay Your Employees Cash in Hand? When you are paying your employee cash in hand work in the UK, you remain responsible for deducting and remitting Income Tax and NICs through the PAYE system to the HMRC. Failure to comply with these responsibilities can result in heavy fines, penalties and legal consequences for non-compliance. The following are your responsibilities as an employer: Report To The HMRC You must ensure to submit accurate and timely returns to the HMRC, reporting your employee’s earnings and the deductions made through PAYE. Providing Payslips Employees are entitled legally to a detailed payslip with every payment, whether it is cash or through bank transfer. Complying With Minimum Wage Laws As an employer, you must ensure that the gross pay for all working hours meets the National Minimum Wage requirements. Meeting Statutory Entitlements You must remain responsible for paying the employees statutory benefits, statutory sick pay or maternity pay. Can An Employer Get Into Trouble For Paying Cash In Hand? Yes, an employer can get into serious trouble for paying cash in hand, if they are doing it to avoid declaring income and paying taxes, this constitutes tax evasion. This can include failing to deduct tax and National Insurance through PAYE, failing to report these payments to the HMRC and paying less than the National Minimum Wage. Penalties can be either heavy fines or prosecution and imprisonment, and employees may lose important employment rights and benefits. There are various …

Read more
financial accounting and managerial accounting

Financial Accounting Vs Managerial Accounting: What’s the Difference

27/09/2021Accountants , Accounting , Business

Accounting data is collected in financial accounting to generate financial statements. Managerial accounting, on the other hand, is an internal accounting method that is utilised to account for all company transactions. This is the key distinction between financial accounting and managerial accounting. This blog will let you know about the differences between these two types of business accounting. Our accountants at CruseBurke are qualified and cost-effective! We save your time, money, and stress by handling all your finances and business problems in no time! So, allow us to do this at an affordable package!      What is Financial Accounting? Financial accounting is an accounting term that refers to the summarisation, recording, and reporting of the financial information of a company. Financial accountants keep track of a company’s internal and external expenditures. They’re also in charge of preparing and submitting financial statements. They give precise data to the company management, as well as persons from outside the company, such as investors, tax officials, shareholders, and business regulators. This information may be trusted because it is accurate in every way. The primary focus of financial accounting is to provide financial information to the external users. So, financial statements are necessary to be prepared, and financial information should be presented according to the accounting rules. What is Managerial Accounting? This type of business accounting is mainly prepared for internal users, such as the company’s management or directors. Its major function is to prepare accounts that assist managers and directors in controlling the company’s activities and making decisions. Managerial accounts are not mandatory, so, they can be prepared and presented in any format that is acceptable for the entire management team. Furthermore, management accounts are prepared only when they are required. Differences Between Financial Accounting and Managerial Accounting The differences between financial accounting and managerial accounting are shown in the following categories. 1) Nature Managerial accounting is used to provide forecasts for the future. Financial accounting, on the other hand, is historically oriented because it must look back in order to assess the previously obtained financial results. 2) Systems Financial accounting is only concerned with maximising profits. It does not care about the company’s entire operating system. Managerial accounting, in contrast, searches for bottleneck activities and looks into alternative strategies to increase profitability by minimising bottleneck issues. 3) Timing Financial statements can be submitted until the end of each accounting period. Managerial reports, in comparison, maybe delivered more regularly to provide timely information to directors or management so that they can make decisions. 4) Reporting Focus Financial accounting’s purpose is to produce financial statements that may be shared with internal and external stakeholders, as well as the general public. While managerial accounting is concerned with operational reports that can be shared with internal users. Conclusion We hope now you will be able to better comprehend the differences between financial accounting and managerial accounting. So, to summarise our blog, we can say that financial accounting provides a company’s current financial status as well as historical data to a wide range of users. Managerial accounting, in contrast, provides forecasts for the future. It focuses on providing confidential information in order to make decisions that will affect future operations. Talk to one of our chartered accountants in Croydon about the online accountancy services we provide. We are just a click away! We provide accounting, payroll, and taxation services in affordable packages! Feel free to contact us!  Disclaimer: This blog contains general information about financial accounting and managerial accounting.

Read more
Defined Benefit Pension

What is a Final Salary Pension – A Basic Guide for Beginners!

23/09/2021Business , Finance , Limited Company , Misc

If you are on the verge of your retirement, you need to know how to plan a retirement. Let’s make your challenge a breeze for you. You are definitely asking yourself, “what are pensions” and how they can help you secure your old age. Pensions are simple savings plans that enable you to get income after your retirement to meet your living expenses. Among the different types, the defined benefit pension plan is reliable as one of the traditional options that is considered by many individuals. This guide will elaborate on all you should know about the defined benefit pension, commonly known as db pension, in easy terms. If you are considering long-term financial security, knowing more about a defined benefit pension can improve your decision-making. Let’s get started! We have skilled financial advisors at CruseBurke that can assist you with pensions and retirement planning! So, get an instant quote now! What is a Defined Benefit Pension Plan? We will begin with the simplest tone: what is a defined benefit pension or final salary pension? The defined benefit pension refers to a category of retirement plans under which your employer will pay a certain amount of money every year for your retirement. This amount is determined by your salary, the length of service that you have served the company, and, in some cases, your age at retirement. The defined benefit pension is characterised by the employer’s responsibility to give the workers peace of mind. Role of Defined Benefit Pension for Retirees in the UK A defined benefit pension plan is predictable and guarantees a certain fixed income after retirement. Unlike other types of pensions, in which the final pot is conditional on investment performance. Defined benefit pension scheme is not a new concept, especially in employment in the UK government, such as in teaching or civil service, etc As also called a final salary pension since the payment is mostly linked to what you earn at the end of your career. This is what makes the defined benefit pension so appealing to the employee. It takes away the risk from your shoulder and that of the employer. This is different from a personal savings account or other retirement schemes. Furthermore, it is basically an employer-sponsored plan in which the company makes the investments. The company ensures that there is a sufficient amount of money to cover the benefits promised. How Does A Defined Benefit Pension Work? Well, as we have covered the basics. It is time to know how a defined benefit pension really works. When you start working with a company with a defined benefit pension, you generally pay a certain amount of your salary every month, and your employer also contributes, usually a lot higher than in other plans. The contributions are placed safely in a large fund, which is invested and managed by professionals. The key benefit of a defined benefit pension is that the amount is defined in advance. It is not a lottery whether you will win it or not. Your retirement sum is calculated by a set formula. In this pension scheme, the employer is fully responsible for maintaining a sufficient pension fund that ensures enough for the pensions of retirees. Let’s see how it works: Pension = Years of service × Accrual Rate × Final Salary For example, 30 years of service with a final pay of £30,000 at 1/60th accrual rate. This means that a sum of £15,000/year is your pension payment. This is what is commonly called a defined benefits pension. This is because the benefits are already defined and secured. Moreover, these pension funds are invested in stocks, bonds, and other assets to increase the amount of money required to pay pensions. When the investments are flourishing, that is good. Otherwise, the employer will replenish the fund. Pros and Cons of Defined Benefit Pension The defined benefit pension scheme comes up with lucrative advantages for employees. Where there are benefits, there are challenges as well. Worry not, most challenges fall on the employer’s shoulders. Let’s discuss the pros and cons of this pension scheme: Pros It guarantees a certain income after retirement. Investment risk is the employer’s responsibility. The defined benefit plan is indexed to inflation. Complete financial security for retirees. Lifelong pension facility. Cons Usually non-transferable from one employer to another. Benefits once fixed cannot be changed. Employers can apply caps or some other conditions. Is a Defined Benefit Pension the Right Fit for You? You must be familiar with the common saying that “not every fruit is sweet”. But still it’s a fruit. Therefore, the defined benefit pension is not a ‘one-size-fits-all’ financial solution. If you are in the public sector and have availed of the defined benefit pension, you are lucky. You will have a certain predictable income after retirement. But on the other hand, if you are in the private sector and change jobs quite often, or go on an early retirement, this might not be a good fit for you. If you are working in a private organisation, you might face a few problems. As this pension scheme is not very common in the private sector nowadays. But, do get professional advice and have a careful thought before opting for this pension. A defined benefit pension scheme is a wonderful investment to consider when a person wants to remain financially stable after retirement. It is a useful addition to your retirement plan because of the predictability and certainty it provides. The fact that the burden of fund management lies with the employer, and also the possibility of protection against inflation. Bottomline It’s a matter of fortune to be in a defined benefit pension plan; it is worth valuing. It is the kind of financial anchor that guarantees a form of income that can be used to meet basic needs such as living expenses, bills, and housing in retirement. You can add to this base of other savings (ISAs or personal pensions) to make your …

Read more