MLR1PP9250 - Penalties guidance: defining direct costs
Accounting matters can be complex and the following is not intended to be anything other than a basic guide to help Compliance Officers understand what figures they may see in a Trading Account.
(This content has been withheld because of exemptions in the Freedom of Information Act 2000)
Gross profit in simple terms is turnover less direct costs.
- Direct costs are basically the cost or goods or services which are sold on to generate turnover. Examples of Direct costs include:
- trading stock purchased by HVDs, such as expensive cars
- the cost of modifying this stock in order to bring it to markets, for example the cost of customising these cars
- the ‘cost’ of money taken by MSBs from their customers
From an accounting perspective ‘cost of sales’ or ‘cost of goods sold’ is defined as:
- any opening stock (closing stock from previous years balance sheet)
- plus, direct costs incurred in the accounting period
- minus, any closing stock (from this years balance sheet)
In practice it is only High Value dealers who will have opening and closing stock and trading stock, such as expensive cars, watches etc.
Adjustments may also be seen occasionally for work in progress in the Accounts of TCSPs or ASPs.
(This content has been withheld because of exemptions in the Freedom of Information Act 2000)
(This content has been withheld because of exemptions in the Freedom of Information Act 2000)
(This content has been withheld because of exemptions in the Freedom of Information Act 2000)
(This content has been withheld because of exemptions in the Freedom of Information Act 2000)