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First financial year not a full year – yearly costs fully or pro rata deductible?

SD
30/11/2022
Question

What if your first financial year is not a full year? How do you record yearly costs such as fire insurance, property tax and the like for that year?

For example, suppose I start my sole proprietor on 1 December 2022 and want to record my fire insurance as an expense. Do I book it as 1/12th of that cost (according to the professional use % in my case) or can I book the entire cost? Or can you only book fire insurance for the month in which you paid it, meaning I cannot include it in my first year?

I think you should calculate it as follows (note that there is not much left over, but still...):

1,200 euro fire insurance for a whole year (1/12) because only enabled for one month, starting on 1 December in your example * professional use percentage (say 20%) =

20 euros remaining for your accounts from the 1,200 euros of fire insurance. Not much, but still :)

That's how I would do it, curious to hear your feedback!Oops, I didn't do that during my start-up year (2021)... I did start in April, so it was only 3 months that were wrongly included?

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You really should try it out for yourself. Even if you don’t have a company number yet, you can already go ahead.

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