Clients with a Nominal Ledger
Some entities are subject to tax on their accrued income, but are not interested in accrued income for accounting purposes; other entities want to record accrued income for both tax and accounting purposes. In the UK, the tax authorities refer to accrued income as the Accrued Income Scheme. Trust Accounts allows for either treatment. Assuming the nominal ledger is in use, this is set when the investment account for a fixed interest stock is set up:
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Tax Only |
Tick the Accrued Income Scheme check-box. |
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Tax and Accounts |
Tick the Accrued Income Scheme check-box and also assign a nominal account to Accrued Income. |
Accrued Income Scheme – Tax Only
When posting Investment Entries for purchases or sales, a window appears for the accrued income amount on the transaction. Once entered, this information can be edited through Details - CGT Details - Accrued Income. The information entered has no effect on either the investment or nominal ledger. However, it does appear on the Income and Acquisitions Schedule, as this report analyses the income according to its tax treatment.
Trust Accounts does not calculate the accrued income amount. There are various calculation methods that can be used such as ‘30 day month’, ‘365 day year’ and ‘US Treasury Stock’. However, in most cases this is not necessary as the amount is usually available on the Contract Note. The Security record has a field for the Accrued Income Calculation method, but currently this is only for memorandum purposes.
Example:
A person buys 1000 units of Treasury 10% Loan Stock cum div for GBP1000 on 06/04/1999. There are two interest periods during the year: 1 January to 30 June and 1 July to 31 December. Consequently, on receiving the stock, the buyer is entitled to an allowance of about GBP26.52.
The postings are as follows:
PUR 06/04/1999 1000 @ GBP1000 - with GBP26.52 entered as an allowance when prompted.
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Dr |
Cr |
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Bank |
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1000.00 |
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Investment Cost Account |
1000.00 |
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Accrued Income Scheme – Tax and Accounts
In this case, the Accrued Income window appears as before when the purchase or sale is entered. However, this time the amount is posted through the nominal ledger to the account selected at the time of setup. The application automatically gives it a Journal Type of V. An allowance is a debit to the accrued income account and a charge is a credit. The user can see the accrued income in the Investment Account window which details the postings on each investment. Accrued income amounts can also be seen on the Investment Schedule.
Example:
A person buys 1000 units of Treasury 10% Loan Stock cum div for GBP1000 on 06/04/1999 as before.
PUR 06/04/1999 1000 @ GBP1000 - with GBP26.52 entered as an allowance when prompted.
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Dr |
Cr |
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Bank |
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1000.00 |
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Investment Cost Account |
973.48 |
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Accrued Income |
26.52 |
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