EM3575 - Recalculating profits: private side - means tests: method - one year

A means test uses the figure for declared income and takes away from it any money estimated to have been saved and known items of expenditure during the same period. The resulting figure represents what was available to meet living expenses. Usually, the test will cover the period of accounts. Unless there is information about capital sales and acquisitions, details of saving will have to be assumed from returned figures of interest.

A typical means test might look something like this.

Ìý Ìý Ìý Ìý
Incomings Ìý Ìý Ìý
Drawings 9500 Ìý Ìý
Spouse’s wages 1750 Ìý Ìý
Building Society interest 450 Ìý 11700
Ìý Ìý Ìý Ìý
Outgoings Ìý Ìý Ìý
Mortgage 3500 Ìý Ìý
Income Tax 1500 Ìý (5000)
Ìý Ìý Ìý Ìý
Savings Ìý Ìý Ìý
PY interest 350 @ say 7% on capital 5000 Ìý Ìý
+ interest 350 5350 Ìý
Ìý Ìý Ìý Ìý
CY interest 450 @ say 7.5% on capital 6000 Ìý Ìý
+ interest 450 6450 Ìý
Ìý Ìý Ìý Ìý
Increase in Savings Ìý (1100) Ìý
Ìý Ìý _____ Ìý
‘A±¹²¹¾±±ô²¹²ú±ô±ðâ€� Ìý 5600 Ìý