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Bookkeeping & Sage Opening Balances

I provide administrative assistance to a small local ltd company. The current bookkeeping system is maintained via spreadsheets. ie Sales Day book, Purchases day, bank rec. This is done by the director. I do the filing of receipts etc. Accountant has now suggested company should get a computer package and the company bought Sage Instant Accounts. In the past we just past all the spreadsheets to accountant with the bank statements and receipts for him to check and produce the year end accounts.

I would like to ask for some assistance in entering the opening balances as the accountant says we have all the relevant balances in the year end accounts and this is an easy task unfortnately with no further help. I assume the company does not pay him enough for further advice.

In the year end accounts there is an accrual for £950. Do we have the enter this as an opening balance as the expense relates to last year? Although actual payment was made after end year. My boss has produced a trial balance(manually)from the year end accounts in preparation for entering to Sage but if the £950 is not included the tb does not balance.

Also under current liabilities section there is a value of £10,234 under directors current account? What would this be in Sage? I have been informed that this is just an account that lists incoming outgoing for director therefore should this be set up as directors account incoming and out going ie 2 accounts. What are the usual accounts names for this? Also is this the right explanantion for a directors account.

My boss wants me to update the Sage system after he enters the opening balances but if they are wrong the system will not be correct. I have suggested the company employ a bookkeeper but he says he can't afford one. Unfortnately my accounts experience is limited to sales/purchase day books and bank rec. I do not want to be in charge of a system that does not balance in the first place and I preferred the system of pass to the accountant for his instruction.

Any advice would be greatly appreciated.

Regards

Jennifer Thomson
Jennifer Thomson

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how I set up the Directors Loan as a Sage Bank Account
Alexey - I've posted a reply in the thread "Setting up a Directors Loan Account" which I assume you posted.

Sorry not to reply sooner, but my broadband has been down this week & I had to wait for a new ADSL filter from BT.

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Director's Loan & floating accounts
Alexey,

I am not sure what you are trying to find out - "How to set up a loan account as a bank account" or "How to make it a floating account in the chart of accounts"

I'll do my best. Bear in mind that my answer relates to Sage Line 50 and I don't know what version of Sage you are using.

To set up a new account select the Bank tab which will then show a list of your existing bank accounts. Click the "New" button and enter the details. It is more than likely you will not have a bank statement to reconcile against this account and Sage allows you the option of setting up an account that does not need to be reconciled.

From within the Bank tab it is then easy to select "Transfer" to reflect the payment (refund, if you like) of money from Company to Director or vice-versa. Supplier payments are recorded by selecting this new bank account and then recording the payment in the usual way.

This is one method of recording Director's Loans.

Another would be to set up a Nominal account and code any receipts or payments to it. Mine is set as a Long Term Creditor in the Chart of Accounts. If I owed the company money then the nominal account would show as a Debit balance and have the effect of reducing the Total of long term liabilities. In most cases the company owes the Director money and the decision is usually taken to set it up as a liability account in the first instance against which you can record any receipts or payments. If I owe the Company it would then be an asset and you would have to prepare the Balance Sheet to reflect this.

Thinking about Jane's solution it sounds as if, in order to set this up as a 'floating' account she has created a separate heading in the Chart of Accounts i.e. where you normally see Total Current Liabilities, Total Current Assets etc. you would also see Total Directors Loan.

The new bank account when she set it up would then be given a nominal code that fits under this heading in the accounts structure. If it was on its own it would then appear as either a debit or credit balance depending on its balance.

Please bear in mind I am a bookkeeper not an accountant. I am guessing that is what she did, not advising you whether to do it or not. I am sure there is more than one way. I hope you get an answer other than mine for clarification.

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Wonderfully egocentric
What a wonderfully egocentric contribution from Chris Caspell, encouraging book-keepers to be consistently wrong just to make his life easier (or more prosperous?)

I don't suppose that correct cost allocations are really very important to small businesses, they are not interested in where their money is spent, cost control, budgeting or management accounts. All that matters is that the job is made as easy as possible for the external accountant coming in 6 months after the year-end to prepare a set of documents that are ancient history by the time they are completed and immediately archived.

I didn't realise there were still accountants out there who thought like that! Over to you Chris....

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Training is the key
My comment below attempted to avoid patronising Jennifer by assuming that she was incapable of what was required. However it is worth mentioning that many or most Adult Education centres offer evening courses in computerised accounting, most of which will, I guess, use Sage as a basis.

However if Jennifer is really out of her depth, she should make this known to her employer NOW, as it would appear that this is not what she signed up for and should not be expected to wallow for long, nor take the blame if it all goes horribly wrong.

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The egotist is back...
Thanks for your vote of confidence Graham (wonderfully egocentric) but you missed my point by a mile I am afraid.

Especially in a small company the administrator-come-bookkeeper (as Jennifer appears to be) will have a number of things to do and probably limited time. If the bookkeeping task is new and the person is unconfident then guess which duties get pushed to the bottom of the pile?

Add to this the worry that everything that you enter into the accounting system has to be correct first time and the job is never started, lack of time is blamed and everyone is worse off.

In 12 years of practice and Sage training I have seen this happen many times. We are not trained as psychologists (unless it has been added to PE2 recently?) but being aware of people's limitations and fears while at work can really help to make the job of external accountant/adviser easier.

Adopting the attitude of "be consistent, everything can be fixed" has for me had completely the opposite effect to that which Graham seems to expect. Fewer mistakes are actually made because the newly-incumbered feels confident enough to enter the transactions without fear of "breaking" Sage. Fees for bookkeeping are much reduced as there is less to do at the year end as most problems are fixed as they occur and any journals that do need to be made can be easily done because any mispostings are all to the same account. Finally the newly trained bookkeeper feels empowered and in control of the new system that is kept uptodate.

Graham may consider this attitude "old school" but it seems to work. My client base is increasing and because I am in contact with the clients regularly and not just for one long stint at the end of the year the clients that I do have stay with me. My fees are no higher than they were when I was preparing accounts at the year end - more simply the time spent is spread out through the year rather than clustered together at the end of the accounting period. This also helps with cashflow for the business as they are invoiced more frequently with lower fee notes.

So to sum up, my mantra for today: empower your clients! Make them do the work that they know how to do much better than you do. Fill them with confidence so that they CAN beat the Sage giant. Lead us into a new world where every debit has an equal and opposite credit and there is no word for suspense account.

(Sorry - got a bit carried away in that last paragraph)

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Sage
Hi Jennifer

As long as you make your boss aware of the fact that this is new for you, I don't see any problem in you trying to set up Sage correctly. I have spent the last month retrospectively fixing opening balance errors on Sage and once you get into it, you will be glad that you have done this up front.

My initial advice would be, if you still don't feel up to it, and if the accountant is of no help, ask the boss to get a bookkeeper in to set it up. I am sure a local bookkeeper would not mind a one-off job, and would not charge over the odds for it.

Once you get going, Sage is ok, though if you are going to get into doing the books regularly and properly, taking a college course might be a good idea, just to get some good grounding in the fundamentals.

Good luck and let us know how you get on.

Jenni.

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my 2 penny'th worth...
Hi Jennifer,

As always, get 5 accountants in the room and you will get 5 different ways to do things. This isn't a problem really - just choose one way and stick to it until you know the system well enough to try other ways.

Sage Instant is a very good program and with a couple of hours tuition and a little help available if you are confused by something will be all that you need. I have trained quite a few administrators to do bookkeeping tasks and they have all been successful providing they remember two things:

1. Do things consistently - i.e. if you decide for some reason that you want to post Sainsbury's Fuel bills to Print, Post and Stationery that is fine, just make sure you do it every time. In that way, when you discover that really you should have posted it to motor expenses you, or your accountant can make one simple journal to move it to the right place.

2. Everything can be fixed as long as you are consistent. (see rule 1).

If your boss is worried about the cost of getting a bookkeeper to do the bookkeeping then he might be more willing to get one to simply set the accounts up (input TB etc.) and give you a couple of hours tuition. This will be much cheaper than using the accountant or even going to night-school.

Finally there is always accountingweb to help you out if you have a question that you can't figure out yourself. I am sure that most accountants are familiar with Sage to a greater or lesser degree and if you clearly state your problem it won't be long before an answer will pop up.

Have a go, remember that nothing can't be undone and good luck.

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To all who have replied
I would like to say thank to all who have replied to my post and the encouraging advice given. Also appreciated the honesty within those replies.

Maybe I should have put this in my original post. My boss knows of my limited experience and is fine with this. He would like me to use this as an opportunity to improve my skills so when the business grows further as it has done in the last few years my skills are in line with business needs. He has paid for a course in the local college called Introduction to Bookkeeping(Manual & Computerised). I started this in mid Jan. I have not got to the accruals section yet. Hence the reason for the post. The accountant provided me with inital training in manual day books which he set up via spreadsheets.

Due to my limited knowledge at the moment I was concerned that we did not have a directors current account but we do we affectionately call it " money boss can draw". I also knew about issues regarding unpresented cheques and the bank rec facility in Sage. I read part of the manual provided with the software. John MacKay(First to reply) provided me with the info I needed to enter these balances correctly and my understanding of the real terminology. I also have experience using Sage but again limited to entering sales/purchase invoices via previous employment.

My position within the company is to grow into a bookkeeper/office manager role as in 3 months he will be changing premises and adding further staff.

Again thank you. After the balances have been entered I will let you know the outcome. Success or failure.

Jennifer

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Update
Good for you, Jennifer.

One point, I think, that needs correcting, is that it is NOT necessary to include unpresented in the Bank Opening Balance,(contrary to what Mr Mr Willis has suggested) as it is normally the reconciled bank balance that is recorded in the Final Accounts, which will include the unpresented o/s at year end.
What that means in your new computerised system is exactly the same as it meant in your handwritten system, ie any cheques written out and recorded in the Accounts before cut-off date do not require to be posted again in the new year.

I would suggest that you DO include the Nominal Ledger, so that you can post the purchase invoices, sales and other expense invoices direct to the relative sales/purchase ledger and at the same time analyse the contents to the correct nominal account(s) and VAT, if registered.

That way as soon as you have entered a purchase invoice on the system, you will have updated the supplier account, the nominal expense account, the VAT Inputs A/c and the Trade Creditors Account, all more or less in one line. Then do the same with the sales and expenses invoices. post your P/cash and Bank entries and your system will always be up to date.

You will be able to print off the quarterly VAT Report for the VAT Return with very little extra work, if your Co is VAT registered and the whole exercise will have imnproved your skills.

Read the User manual/(Help)- may be on the prog itself)- that came with the Sage prog so that you fully understand what the prog does in updating the various ledgers and then apply to the boss for a salary increase to reflect your new skills and added responsibility!

Keep us posted - we are all here to help and learn from one another and we all did start off knowing very little ourselves. In fact being born was such a shock to me, that I couldnt speak for three years! LOL!

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The Wisdom of Sage!
Dear Mr Willis,
Unless this is a particular shortcoming of Sage Accounts progs, then I can see no reason to enter the presented cheques again, as the correct bank balance will have been b/fwd - reconciled to any Cash Book balance to y/e. Posting presented again in the new year will mean they are double posted to the relative a/ccs.
The only way that your course of action should be input is if you are reconciling the Cash book to the closing Bank Statement balance as shown on the Bank Statement at year end. The usual accounting treatment is to reconcile the Bank Statement to the Cash book.
Any year-end o/s cheques presented in the new year are ignored as they ae already in last years. Just tick them off your printed copy of the year end Bank Rec. Job done!

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Now now, children!
You are both correct, but Mr Willis is more correct.

At no point, Mr Mackay, did Mr Willis suggest posting the presented or unpresented cheques in the new year and double counting them. It is clear (to me anyway) that he is proposing that a single entry per the bank statement is entered (and reconciled on Sage) and that further individual opening balances representing those uncleared items be entered making the total opening balance agree with the cash book. That way when those transactions clear they can be reconciled through Sage and not outside of Sage.

Outside of Sage can get complicated if there are many items outstanding at the year-end and if some suppliers are slow to present cheques, notwithstanding that one or more cheques may have gone astray. Happy now?

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on Director's loan account
I've set up a Director's loan account as a Bank Account. This makes it very easy to document Bank Transfers to or from the company bank accounts. It is also easy to document the Director paying a supplier - which happens a lot because we don't have Company Credit or Debit cards.

Also, I made it a floating account in the Chart of Accounts - so that it automatically becomes an Asset or Liability in the Balance Sheet, as appropriate.

jane

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Dont' forget opening bank rec.!
I was a little surprised to see David Carter encouraging the practice of leaving the Nominal Ledger to the accountants. The whole point of a computerised system is that it brings together the entire process in one integrated package. Also, nobody has mentioned the necessity to enter the unpresented transactions from the opening bank reconciliation. If these are not done, the bank rec. facility in Sage will never work unless and until ALL the unpresenteds have cleared.

The best way to enter an opening TB is to create an account for EVERY account in the B/F one. It is ofetn useful to raise a 'dummy' account for the Purch. Sales, and Cash Book accounts, and yes, you do need the accrual and the director's current account! Then simply create a general journal whci posts all the balances to all the relevant accounts, with the subsidiary ledgers going to the dummies. Then enter all the outstanding purch., sales, and cash items, with their original dates and numbers (if Sage will let you; I can't remember what it does if it is out of period), coding them to the relevant dummy accout. If the b/f balances were correctly reconciled, the dummies will be zeroed after this process.

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Too much!
Jennifer

I really think you could be taking far too much on here without lots of support initially from the accountant and on-going proper training.

I say this on the basis that you do not have experience as an all-round book-keeper let alone Sage software.

If you try to go it alone, you will undoubtedly mess up, feel bad, be under severe pressure, want to leave and ultimately resign.

Anyone saying it is your chance to shine have obviously forgotten what it feels like to know far less than they do now.

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Your chance to Shine!!
Jennifer,
Do not be put off by what appears at first to be a daunting task, if you are new to book-keeping.

You already know that Accounts have to balance and the usual set up for any business is to have an opening Trial Balance which can be posted on to the computer system.

The Accrual of £950 should be posted as an opening Credit Balance against whatever P&L( Expense A/c(s)) to which it refers. It may be Accountancy fees that had not been billed before the Accs were prepared, but because the expense related to that year it was provided for. The other side of the Accruals will be included in the Trade Creditors and Accruals already. You already have said that this figure has been paid since the year end, so you will know who and what it was for. By having the credit in the accs already, when the invoice is posted, the net result for his year is NIL as it was already included in last year's accs to which it correctly refers.

The Directors Current Account could be a Directors Loan Account, which can be in debit or in credit. This account reflects transactions between the Co and the Director and as it is a current liability, the Co owes the Director money, possibly for Co expenses that the Director has paid for personally and has not as yet been re-imbursed for by the Co.

Once you are on a computerised system (and I personally do not think Sage Instant is the best start up prog) you will soon get the hang of it.

Your opening T/Balance should be the accounts that form the closing Balance sheet of the previous year plus any accruals/prepayments at that date.

As the Accountant will have a copy, it would be best for you to ask him for a copy of the closing T/B and Opening T/B (including decimals- ie pennies) so that you can reconcile your Bank A/c, Purchase Ledger and Sales Ledger opening balances to the relative Trade Creditos and Debtor A/cs in the Accs, which in reality are Control Acounts, summaring the monies due to and from all the people with whom you trade on credit and known to you as the Purchase/Sales Day books.

Unfortunately, you or the Director may only have an abridged version of the Balance Sheet, which does not readily show the breakdown of Current Liabilities/ Assets etc unless you have access to the Notes, hence the importance of getting a precise opening Trial Balance.
Good luck.

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Forget about the nominal balances
Jennifer, I'm not sure what skill level you have; let's assume it's nil. As John suggests, this is your big chance to improve your skills.

You talk about balances on accruals and directors' current accounts. This is heavy accountant stuff and I would suggest you just forget it. It isn't necessary anyway.

In practice, most new users don't post an opening Trial Balance. Except for one or two accounts they leave the Nominal Ledger blank and let the accountant sort it out later. For someone who knows what they are doing it will only take 10 minutes. I know John is trying to be helpful but believe me, Nominal Ledger is for accountants only. You will only mess it up.

Leave the Nominal Ledger alone and concentrate on Sales and Purchase opening balances. These you can understand and they are what really matter anyway. Plenty of bookkeepers run accounts packages successfully without knowing anything about the Nominal Ledger at all.

Sales and Purchase Opening Balances
When the accountant produced the year-end accounts he should have made two lists, one of the unpaid sales invoices at year end and one of unpaid purchase invoices. You have to find these two lists! They are your opening balances.

First you have to key these year-end invoices onto the computer. Then you have to key in all the sales and purchase invoices for this year so far and get yourself up to date.

If you want to play it this way, I suggest you dig out those two lists of unpaid invoices. When you've got them, come back onto Any Answers and I'll tell you the next steps.
David

PS And by the way, keeping running your manual cashbook, at least for the first year.

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Bank Rec. (again!)
John Mackay's comment that the book cashbook balance will include the unpresenteds is, of course, quite correct. However if this is entered as a 'one-liner', then the unpresenteds cannot be cleared correctly as they present. It is necessary to enter the balance as a one-line entry for the actual statement balance, along with all the unpresenteds individually, in order to make the latter available to clear later.

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