is dividends a temporary account
Danbro has created a useful guide to help contractors and temporary workers affected by changes introduced in Gordon Brown’s March Budget.
We have produced the Guide to Managed Service Companies Legislation for both recruitment agencies and clients who may operate through a Managed Service Company (MSC).
MSCs typically provide administrative services, produce invoices and receive payment for work carried out. Prior to the Budget, they paid contractors a small salary, with the rest in dividend payments, which reduced their tax bill and National Insurance contributions (NICs).
The MSCs must now operate Pay As You Earn (PAYE) and deduct tax and, from 6 August, Class 1 NICs from income earned by its contractors.
Damian Broughton from Danbro says: “As an accountancy practice, we are exempt from MSC legislation and offer a range of services that can help contractors to operate in the most tax-efficient way. These include:
- Umbrella company – a service fully approved by the Inland Revenue
- Limited company options tailored to each individual clients needs.
“This new legislation is complex and contractors are strongly recommended to seek the advice of a qualified, professional accountant or financial adviser to make sure they do not foul of the rules.”
Copies of the guide are available by calling Danbro on 01253 600140 or e-mailing
enquiries@danbro.co.uk
or for more information visit
Danbro – Accountants for Contractors
About the Author:
Danbro – Umbrella Companies providing umbrella services to contractors across the UK.
Article Source: ArticlesBase.com – New Guide to Managed Service Company Changes
Question: Which of the following entries properly closes a temporary account?
a.200 debit dividend; 200 credit, Retained Earnings
b.400 debit,Income Summary; 400 credit, Rent Expense
c.1,600 debit, Accumulated Depreciation; 1,600 debit, Income Summary
d.20,000 debit, Income Summary; 20,000 credit, Service Revenue
Answer: My Guess is b. through the following logic:
Not a. because R/E is not a termporary account
Not d. because revenues carry a credit balance, so crediting it further doesn’t balance it
Not c. because A/D is not a temporary account (plus I believe it’s a contra asset account, therefore it carries a credit balance as opposed to the typical debit balance that an asset account would carry)Income accounts are typically temporary and both accounts in b are temporary, plus expenses carry a debit balance, so crediting it closes the account