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HMRC internal manual

Holding and Movements Alcohol Strategy - Credibility

HM Revenue & Customs
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Predictive Analysis: What is the principle behind cash reconciliation?

Ideally, a trader’s spending should equal the money received. By calculating thespending, the declared takings can be verified at visits:

Gross takings + Other income paid into the business = Money spent.

The sales figure is calculated by adding the cash banked to any pre-banking cashexpenditure, on items such as wages, drawings, stock purchases, expenses, capitalequipment etc. The accuracy of the exercise depends on the accuracy of the informationprovided by the trader. A potential problem occurs if cash is withdrawn from the bank andspent on these items, or even re-banked. This money would be double-counted, thusinflating the sales value. Cash withdrawn is, therefore, deducted to ensure that moneyspent is only the “first use”.

Accountants use this credibility check to compile annual accounts.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)