CFD Accounting Question

[stun]

Hi there,

I have set up a business as a sole trader. I intend to trade CFD's as well as consulting as an engineer.
I have funded my CFD account from my business bank account. How do I represent this transaction in my business accounts? Is it an expense or is it treated another way?

Thanks

Stuart

 

[DeepState]

Hi there,

I have set up a business as a sole trader. I intend to trade CFD's as well as consulting as an engineer.
I have funded my CFD account from my business bank account. How do I represent this transaction in my business accounts? Is it an expense or is it treated another way?

Thanks

Stuart

It is a transfer. No revenue or expense (maybe credit card charges depending on the actual source) has been received or incurred on this move alone.

 

[stun]

Thanks for that.

I can see now that no financial change has been made so that makes sense, thanks. How do I then account for the future loss or gain in my CFD trading account? Do I have to reconcile it back to my account somehow? or is the transfer one sided indefinately? What if I double it in one month, or worse case scenario I blew the lot?

Cheers

Stuart

 

[McLovin]

Thanks for that.

I can see now that no financial change has been made so that makes sense, thanks. How do I then account for the future loss or gain in my CFD trading account? Do I have to reconcile it back to my account somehow? or is the transfer one sided indefinately? What if I double it in one month, or worse case scenario I blew the lot?

Cheers

Stuart

You account for it on a transaction basis. Bought XYZ at $1 sold at $4 report $3 profit etc. Which account the money is in is much of a muchness. What account are you trying to reconcile it back to?

 

[stun]

My sole trader business account where I track incomings and outgoings for profit/loss and tax purposes

 

[McLovin]

My sole trader business account where I track incomings and outgoings for profit/loss and tax purposes

Why? It doesn't matter what account the money is in. The ATO calls a profir a profit and a loss a loss.

 

[stun]

Ahhh, so I just add my CFD account balance to business bank Balance at any given time then?

 

[skc]

Ahhh, so I just add my CFD account balance to business bank Balance at any given time then?

On the balance sheet, you'd probably just have a line item called "trading account balance" or something like that. It is "cash or cash equivalent" if you much lump it into that bucket.

On the P&L, you'd have a line item called "CFD trading income". You add that to your business income when the time comes.

The real question is probably weather you mark-to-market at quarter/year end on open positions... my guess is that you should.

What if I double it in one month, or worse case scenario I blew the lot?

Actually worst case scenario is that you blow a lot more than what you put it. So don't get into such possibility.

Good luck.

 

[McLovin]

Ahhh, so I just add my CFD account balance to business bank Balance at any given time then?

What skc said. On your bal sheet you'll have an item called cash that has the total cash owned by the business. Then in the notes you'd have it split out by cash in each account. Ultimately shuffling money around accounts doesn't do anything except add journal entries to the ledger.

I guess the only question is why not just put the CFD account in your name instead of in a business name?

 

[stun]

Thanks A lot guys. Much appreciated.

MY CFD account, Business Bank Account and my personal name are all exactly the same, as the simplest form of sole trader. And yes, I see no reason not to use GLV (Gross Liquidation Value) of the CFD account as the current cash balance at any point in time. All commission, access fees and such are all expenses to be offset against income so I think this method will work .

Thanks

Stuart