How many monthly installments does a business on the annual accounting scheme need to make?

How many monthly installments does a business on the annual accounting scheme need to make?

• A. 9 monthly installments starting from month 1
• B. 10 monthly installments starting from month 4
• C. 9 monthly installments starting on end of month 4
• D. 12 monthly installments starting from the end of the year

Answer: (C)

A business that is on the annual accounting scheme typically makes nine monthly installments that start at the end of the fourth month of its accounting year. Under this scheme, the business's tax liability has already been assessed based on the previous year's figures, and the installments are designed to help spread the payment of the tax due over the remaining months of the accounting year. Starting the installments at the end of month four aligns with the timing when the business begins to have a clearer idea of its current year's performance and tax obligation. This approach helps businesses manage their cash flow effectively, allowing them to pay their tax liabilities based on their current trading performance rather than anticipating future earnings, which may vary. Options that suggest starting installments from month one or from the end of the year do not align with the annual accounting scheme's structure, as it only requires nine installments rather than twelve.

A business that is on the annual accounting scheme typically makes nine monthly installments that start at the end of the fourth month of its accounting year. Under this scheme, the business's tax liability has already been assessed based on the previous year's figures, and the installments are designed to help spread the payment of the tax due over the remaining months of the accounting year.

Starting the installments at the end of month four aligns with the timing when the business begins to have a clearer idea of its current year's performance and tax obligation. This approach helps businesses manage their cash flow effectively, allowing them to pay their tax liabilities based on their current trading performance rather than anticipating future earnings, which may vary.

Options that suggest starting installments from month one or from the end of the year do not align with the annual accounting scheme's structure, as it only requires nine installments rather than twelve.