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Post Info TOPIC: Help with balance sheet adjustments


Master Book-keeper

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Help with balance sheet adjustments


I have inherited a nightmare set of books from a client, done by a previous accountant.

I have spent a lot of time and effort putting right what should be on the balance sheet, and bar the ct I've finally got to where I want to be and I'm left with just two item.  Retained earnings from 16/17 and accruals.

The previous accountant showed losses of £103k on Xero but in the accounts submitted to Co House there is a loss of around 30k which puts the loss b/f as £14k

The accruals I have no idea of they have been brought through from a xero conversion in 2016.

Everything on the balance sheet is now correct apart from the 103k. Is there anything I can do to remove them so I can correctly represent a total funds of 13k credit 

I've posted a couple of attachments so you can see where I'm coming from.



Attachments
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John 

 

 

 Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.



Master Book-keeper

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Hi John
Just a few quick thoughts for now.

The large chunk of Accountants (or maybe its just the ones Ove seen) will take the reports for the year from whatever software someone is using then drop the numbers into an extended trial balance (ETB), do all their adjustments in the ETB and file the accounts. Those adjustments can be just moving things from one expense to another, but then the usual accruals, prepayments, CT calcs etc fully required to produce a set of accounts.

Sometimes the software year end and the ETB figures will never meet, ie the Accountants are too lazy (or too busy protecting their future fee income from usupers) to bother making any adjustments in the software.

Those who do adjust fall into two camps - the ones who do so on the last working day of the financial year, then those who do the adjustments on the 1st day. The former at least allow a correct b-fwd figure on day one. The latter just gets thrown into the mix of the 1st working days transactions. Most just lump the P&L adjustments into one figure processed through the profit account in the P&L / RE in the Balance Sheet.

It appears from what you have said that the Accountant is one who didnt adjust from the R/E figure, but who then actually inputted the accruals figure?

So a few other random Qs:-

What software was used prior to zero? Are you able to agree the end figures from that to the start (conversion) figures in zero? Did the lodged accounts bear any resemblance?

Have you obtained ANY information from the prior Accountant re teh year end 16/17? If so - what did you get? If not - why? Are you (/client)able to now go back to ask for breakdowns of the accruals and any other working papers (care required here re the latter).

What does the accruals figure look like for this year? £48k seems high in relation to just the year end trade creditors, but Im unsure if this is the same business as prior years so a big assumption. Certianly if all of that drops out your R/E will drop to c£55k.

Have you got an audit trial from the year 16-17 before you started on your adjustments? Another eye casting over it/draft ETB might flag something up?

I would need to see the full conversion TB, opening and closing TB for 16-17 before your adjustments, full accounts for CT purposes 16-17, CT calculations for 16-17, fixed asset register - have you seen ALL of these?

There are no prepayments.

What/when is deferred tax from?

Does the VAT period not match the year end?

Do the individual trade creditors/debtors actually total to match the control accounts?

Does your £14.4k P&L b-fwd include the £30k from the prior accountant?



__________________

Joanne  

Fallows Hall Ltd 

Winner - Bookkeeper of the Year 2015, 2016 and 2017

Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.

 



Master Book-keeper

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Posts: 7568
Date:

Oops meant to add
Do you trust the accounts submitted and start from there? Or have you been tasked with going back further and are re-submitting?

__________________

Joanne  

Fallows Hall Ltd 

Winner - Bookkeeper of the Year 2015, 2016 and 2017

Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.

 



Master Book-keeper

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Posts: 2939
Date:

Cheshire wrote:

Hi John
Just a few quick thoughts for now.


It appears from what you have said that the Accountant is one who didnt adjust from the R/E figure, but who then actually inputted the accruals figure?  

The accruals figure was part of the conversion journal, which is dated 31st March 2016.  Just spotted that the CJ was done in Feb 18, I've attached it.


So a few other random Qs:-

What software was used prior to zero? QBO

Are you able to agree the end figures from that to the start (conversion) figures in zero? No, I have no record of the QBO figures, which was from a previous accountant to the ones mentioned.  The 15/16 figures have been restated by the accountants mentioned.

The conversion was done 31st March 2016.  16/17 and 17/18 figures are in Xero but I don't trust them.  There's lots wrong, like a loan that didn't have a starting figure and another that was treated as a loan repayment when it was simply paying something back to the Directors spouse, all on one day and I end up with a credit balance of 11k! 

Have you obtained ANY information from the prior Accountant re teh year end 16/17? If so - what did you get? If not - why? Are you (/client)able to now go back to ask for breakdowns of the accruals and any other working papers (care required here re the latter).

None whatsoever.  They are owed oodles of money but the client told me they jumped ship because the accounts on Xero were such a mess. (client does sales invoices, accountant was supposed to do the rest) The accountants filed Co House 16/17 eight months late (which may well be a lot to do with the client because they struggle to respond to info requests but also them because 16/17 adjustments haven't been done until Feb May and June 18) They never filed those accounts with HMRC though.  When I tried to query this both phone calls and emails went unanswered. I'm rather gobsmacked that an adjustment of 90k in Xero in Feb 18 wasn't picked up in the accounts submitted Aug 18 

What does the accruals figure look like for this year? £48k seems high in relation to just the year end trade creditors, but Im unsure if this is the same business as prior years so a big assumption. Certianly if all of that drops out your R/E will drop to c£55k.

The accruals has simply come through the years from the CJ.  My own accruals balance is £400.  Client thinks its a bad debt from a company currently in administration.  I've checked and it went in admin 2016 but hasn't been liquidated yet. Client was supposed to be paid from a Gov grant which the firm in admin allegedly misappropriated before paying over.  Would have expected that to be in trade debtors though? (may well have been part of the 90k)

Have you got an audit trial from the year 16-17 before you started on your adjustments? Another eye casting over it/draft ETB might flag something up?

No audit trail in Xero, but I have just looked at the journals looking for the conversion journal and found a bad debt write off to the 16/17 accounts of 90k.  Looking at Co House accounts the other debtors is 96k.  BINGO, I think I've found it.  One thing I didn't do was look at the 16/17 Xero Balance sheet, and lo and behold its the retained loss is 103k YESSSSS.  Sorry I'll calm down.biggrin

I would need to see the full conversion TB, opening and closing TB for 16-17 before your adjustments, full accounts for CT purposes 16-17, CT calculations for 16-17, fixed asset register - have you seen ALL of these?

Got conversion journal, but not the TB,  Yes,  Possibly, I have the draft accounts sent to the client. No,  No.   I'm happy with the fixed assets, although they weren't adjusted for 16/17 in Xero so I corrected that.

There are no prepayments. I haven't done any adjustments, tbh never considered it, I'm not sure I would be able to because client believes the Xero accounts went to pot in 2018.  


What/when is deferred tax from?  From the conversion journal

Does the VAT period not match the year end? Yes,  I reworked the figures in VT+ but haven't saved the VAT return to close it off.

Do the individual trade creditors/debtors actually total to match the control accounts?  Yes, those are my figures.

Does your £14.4k P&L b-fwd include the £30k from the prior accountant?  Yes, the 15/16 figure was 16059 with a c30k loss in 16/17.  If you take the 90k bad debt adjustment into account it will more or less match.  (Back of fag packet calc tells me its £444 adrift)  


 



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__________________

John 

 

 

 Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.



Master Book-keeper

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Posts: 2939
Date:

Cheshire wrote:

Oops meant to add
Do you trust the accounts submitted and start from there? Or have you been tasked with going back further and are re-submitting?


I was taking the 16/17 figure as read apart from the creditors, and I've done manual adjustments to correct them in 17/18.  Should I restate 16/17 or do the debtor adjustment in 17/18?  

Just need to sort the accrual now.

 

Repasted this as my reply wasn't in blue

I would need to see the full conversion TB, opening and closing TB for 16-17 before your adjustments, full accounts for CT purposes 16-17, CT calculations for 16-17, fixed asset register - have you seen ALL of these?

Got conversion journal, but not the TB,  Yes,  Possibly, I have the draft accounts sent to the client. No,  No.   I'm happy with the fixed assets, although they weren't adjusted for 16/17 in Xero so I corrected that.



-- Edited by Leger on Tuesday 16th of April 2019 12:33:05 PM

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John 

 

 

 Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.



Master Book-keeper

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Posts: 7568
Date:

Hi John
Sorry head very muzzy fo reasons I wont go into on here!

£90k would impact on the P&L as an allowance for DD would be an expense and the corresponding credit in the other debtors, so it could well be that the R/e figure is correct with that. Only issue is - does it sound like a genuine debt in terms of quantum? Seems veryhigh for a company that is only holding £5k now at year end (if Im recall the figures correctly!). Obviously at some point there would have been a corresponding income figure and CT paid on that. Just sounds a wee bit odd.

One thing I did think of when you posted the latest enclosure was the fact that the Franchisor might have a copy of the 15/16 full accounts if your client doesnt, because they tend to insist on it (or pull the rug on the franchise) and often on other bits fo financials as well.

That said I think I would be going back to that first Accountant and seeing if they can assist, at very least with a copy of the accounts submitted to HMRC (and more if they will release it), although have I read it correctly that the second lot of Accountants (ie ONE prior to you) are the ones who re-stated the 15/16 accounts? What was the reason? You need to grill your client under a light? Is it because of this huge bad debt?

Can your client send you copies of any correspondence between them and 1st and 2nd accountants re the accounts?

The Accountants prior to you are not playing ball because the have not been paid? I cannot blame them.

The conversion balances have some other bits of carp that jump out - Accountancy fees separate, not in accruals (deliberate I wonder as a message to the next one?) historcal adjustment dumped to what looks like a suspense account £3k.

Has the business shrunk? Sorry just pondering again on this bad debt and the number involved, had me pondering if the accrual credit balance was something to do with deferred income?

Ok just spotted you have the draft accounts for 16-17. Im sorry Im getting very confused (muzzy headed) but so much easier if I can see what you have and havent got so feel Im not much help! Is it the draft accounts that a pile of cack, the ones before or JUST zero? If the drafts are ok I would be tempted to start with those as an opening balance and re-do from there, but that probably isnt helping given you have done a pile of work. Also would be good to understand what it is they do (re my deferred income comment) but appreciate this might not be the place to say it in the event your client can be recognised by past profs and others. OUt of interest - how many entries roughly since the pile of pants youve had to deal with?



__________________

Joanne  

Fallows Hall Ltd 

Winner - Bookkeeper of the Year 2015, 2016 and 2017

Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.

 



Master Book-keeper

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Posts: 2939
Date:

Cheshire wrote:

£90k would impact on the P&L as an allowance for DD  would be an expense and the corresponding credit in the other debtors, so it could well be that the R/e figure is correct with that. Only issue is - does it sound like a genuine debt in terms of quantum? Seems very high for a company that is only holding £5k now at year end (if Im recall the figures correctly!). Obviously at some point there would have been a corresponding income figure and CT paid on that. Just sounds a wee bit odd.

I've compared the original 15/16 bs and the restated ones, and the difference is a write down of other debtors from 171k to 92k, and an increase of creditors from 94k to 104k.  On the original the retained earnings are 105k reduced to 16k on restated. On the 14/15 amd 15/16 original the debtors is the same figure, up from 105k on the 13/14 accounts.


Ok just spotted you have the draft accounts for 16-17. Im sorry Im getting very confused (muzzy headed) but so much easier if I can see what you have and havent got so feel Im not much help! Is it the draft accounts that a pile of cack, the ones before or JUST zero? If the drafts are ok I would be tempted to start with those as an opening balance and re-do from there, but that probably isnt helping given you have done a pile of work. Also would be good to understand what it is they do (re my deferred income comment) but appreciate this might not be the place to say it in the event your client can be recognised by past profs and others. OUt of interest - how many entries roughly since the pile of pants youve had to deal with?

I think I'm an idiot!!!  I've used Xero as my basis for the 16/17 accounts and it's that that has thrown me out. Looking at the 16/17 draft accounts there is no mention of the £48k accruals, 

Bank loans and overdrafts 38k Trade creditors 6k    Taxation and social security 30k  (seems high)  Other creditors 25k    

I'm going to redo it based on the draft accounts and see where I end up. 

Thank you for your help so far.



__________________

John 

 

 

 Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.

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