Re: Refunding money to a customer

[John Locke <..hidden..>]

Hi,

Stroller wrote:
> My concern with this method is that the £100 would appear to show as  
> income.
>
> IE: the taxman sees an invoice for £500, payments of £500, and so  
> taxes me correspondingly. But I haven't received £500!
>
> I want the taxman to tax me only on £400, and to see paperwork to  
> explain the £100 discrepancy between the income and the £500 invoice.
>
>   
I believe this is a difference between accrual vs cash-based accounting. 
If you're doing cash-based reports, the cash shows up, and you'd pay tax 
on it. If you're doing accrual-based reports, I don't think you book the 
income until you've generated the invoice for the sale. So even if you 
received the cash ahead of the invoice, you don't pay tax on it, and it 
shouldn't show up in your income statement, until you've created an 
invoice and applied the overpayment to it.

Or maybe I'm mis-understanding the situation? It seems to me that's how 
it SHOULD work, anyway... I'm assuming it does, but I haven't verified this.

Cheers,

--
John Locke
"Open Source Solutions for Small Business Problems"
published by Charles River Media, June 2004
http://www.freelock.com