When you set up a new spending category or edit an existing one, you’ll be asked to choose the Reporting Name.
These correspond to the names available from the UK GAAP XBRL taxonomy for limited companies.
GAAP stands for “Generally Accepted Accounting Principles”. The UK has its own set of rules which limited companies must abide by when preparing their accounts, which are called UK GAAP.
Most small companies will use UK GAAP but rarely some will use the international rules, which are called IFRS (International Financial Reporting Standards). FreeAgent doesn’t deal with those.
Part of what UK GAAP defines is the way that a limited company’s accounts must be laid out.
It will also become a requirement that all limited companies must file their accounts electronically using XBRL (eXtensible Business Reporting Language). XBRL is available in a number of flavours (‘taxonomies’) of which UK GAAP is one.
At FreeAgent we’ve chosen the most frequently used tags and made them available as Reporting Names.
This means that when you set up your new spending category, if you pick the correct reporting name, transactions to that category will be labelled correctly in your accounts.
Choose the name from the list. Pick the one that’s most appropriate for the category you’re setting up.
For example, if your limited company runs a wedding planning service, you may want to include a specific category for printing invitations.
This would go into Printing in your accounts, so you’d pick the Printing costs name.
You also need to choose whether this category is allowable for tax or not.
The box is ticked by default. Leave the box ticked if the category is allowable, untick it if it’s not allowable.
That just means whether you’re allowed to take this expense off your company’s income when you’re working out the profit that the company will pay tax on.
Most business expenses will be allowable, but some, such as entertaining anyone other than any staff your company employs, will not be.
Check with HM Revenue or your accountant, if you have one, if you’re not sure whether an expense is allowable or not.
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