Q&A: Accounting for sales income and expenses on a business that has ceased trading
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Q. My mother died suddenly so her sole-trader business ceased at that point. I am the executor of her will and I appointed a solicitor to collect the debts due on her outstanding sales invoices after her death. The business was taxed on a cash basis. How should I account for the sales income and expenses received after the business ceased?
A: As your late mother used the cash basis, all the business expenditures paid out and sales income received before her death should be reported on her personal tax return drawn up to the date of death.
The cash received for the business after the date of death should be reported by you as executor of the estate on a tax return for the estate. The costs of collecting those sales debts are deductible against that sales income.
About the Author
Paul Newbold
Partner
After qualifying with KPMG where he gained significant audit experience, Paul joined Torgersens in 1991 and became the firm’s audit partner in 2000.
Paul employs his broad range of financial skills to provide commercial and accounting advice to a range of owner-managed businesses in the independent retail, education and professional services sectors. He also has extensive experience dealing with charities, Registered Social Landlords and not-for-profit organisations and co-operatives.
Outside of work, Paul likes to visit Eastern France and South-West German and read novels by David Morrell, Michael Blake and Harper Lee. He also likes watching films, his favourite is The Shawshank Redemption.
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