Complicated situation with very old balances from previous accountant

Complicated situation with very old balances...

Didn't find your answer?

I am trying to get to grips with a very messy new client situation where alot of the opening balances appear to have not moved for many years. Limited company just one Director.

Specifically there is a significant debtor who went bust in 2003 and another quite large debtor who went bust in 2012. Both were still sitting in the accounts at 31/12/13. These both need to be written off but is it best to spread the write off over 2 years (writing just one off will create a loss for the year)

A more complicated item is a total creditors balance of 40,000 in the previous Accounts which is made up in the creditors listing of a creditor of 70,000 (an amount going back 10 years which is owed to a sole trader company which the Director used to operate)  but this is contra'd in the detailed listing by a debit of 30,000 being shown as owed by the same Director to the Limited company. As the credit of 70,000 is effectively owed to the Director from his sole trader business and the 30,000 is owed by the same Director would it be in order to net the 2 off and say there is a credit balance owed to the Director of 40,000 which he should be free to take out?

There are also minor issues with very old VAT and PAYE credit balances but these are smaller and it may be easier just to write these balances back into profit.

Replies (15)

Please login or register to join the discussion.

By petersaxton
29th Jul 2015 21:26

Write off over two years?

Then the first balance sheet you prepare will be wrong.

Thanks (2)
Steve Edwards
By stevo5678
29th Jul 2015 20:50

I've got a kind of similar job with terrible sage accounts and missing records brought forward. We can only work with what we have :) and inevitably assumptions will have to be made. Just need always bear in mind how HMRC would view these 'assumptions'. If it is in their favour they tend to not care as long as the current state of affairs is good.

Thanks (0)
By johngroganjga
29th Jul 2015 20:59

Yes write off the old bad debts (heeding Peter's point above).

Yes net the two director balances off.

Thanks (0)
avatar
By soundadvice
29th Jul 2015 23:41

Thanks for the feedback. I feel a little more relaxed about it now!

John .. I was a bit concerned that the creditor in the books to the Directors old sole trader business of 70,000 might be viewed as a separate issue to the debit balance in the books which suggested the Director owed the Company money (30,000). If they were viewed separately I thought the debit might create S455 Directors Loan issues.

Is the netting off OK because a sole trader is viewed in law as one and the same as the person trading (if that makes sense) 

Thanks (0)
Replying to Ralph-gab:
By johngroganjga
30th Jul 2015 05:58

Netting off

soundadvice wrote:

Thanks for the feedback. I feel a little more relaxed about it now!

John .. I was a bit concerned that the creditor in the books to the Directors old sole trader business of 70,000 might be viewed as a separate issue to the debit balance in the books which suggested the Director owed the Company money (30,000). If they were viewed separately I thought the debit might create S455 Directors Loan issues.

Is the netting off OK because a sole trader is viewed in law as one and the same as the person trading (if that makes sense) 

Yes netting off is OK precisely because the debtor and creditor are the same person.

Thanks (0)
By Penfold
29th Jul 2015 23:57

previous accountant ?

or previous bookkeeper ?

 

These are the questions that are killing A Web.

Thanks (2)
Replying to jon_griffey:
avatar
By landscaper
30th Jul 2015 09:42

Why?

Penfold wrote:

or previous bookkeeper ?

 

These are the questions that are killing A Web.

 

Why are these questions killing A Web?  Surely not everyone has dealt with every possible situation or not on a regular basis and wants advice or reassurance.  If everyone is expected to know erverything what would be the point of having a forum.  There would be nothing to discuss?

 

Thanks (5)
avatar
By Mr_awol
30th Jul 2015 11:04

I assume penfold is referring to the number of basic bookkeeping questions.  Stuff like this: https://www.accountingweb.co.uk/anyanswers/question/should-i-keep-accumu...

There was also a recent thread where someone (intending to be helpful admittedly) offered advice but preceded it with "I'm not an accountant but"

Depends on your outlook I guess.  'Accounting' covers all sorts from basic bookkeeping to complicated tax planning so I don't think anyone can say that questions like this shouldn't be here - however id have thought there were other (more appropriate) forums for basic bookkeeping queries.  An abundance of them here will discourage the more technically able posters whom some of us enjoy a chat/debate with or who can form a useful sounding board frm time to time.

Thanks (0)
Replying to psimonparsons:
By mrme89
30th Jul 2015 11:36

Admission

Mr_awol wrote:

 

There was also a recent thread where someone (intending to be helpful admittedly) offered advice but preceded it with "I'm not an accountant but"

 

 

At least by their own admission it gave the OP a heads up to the quality (or lack of) of the comment.

 

In a forum full of personas we often can't guarantee anyone's credibility.

 

 

Thanks (0)
avatar
By kiwilondon99
30th Jul 2015 11:30

Ledger vs Accounts

 

has the ledger you are looking at been actually reconciled to the FINAL accounts

adjustment/reconciliations entries, final accounting and tax entries made, by the accountant  over the years, may not have been passed back to the bookeeper to input, or just not input,  into the prior closed year ?

review and be careful about writing off  current ledger items until certain

Thanks (0)
avatar
By soundadvice
30th Jul 2015 21:07

Just for information in this case the accountant also did the bookkeeping for the client. So it was the full service bookkeeping, accounts preparation and tax. Reconciliations were done but the books were just not being adjusted and corrected for very old items and contained things like "unreconciled balances brought forward" and old delinquent debts that weren't being written off.

I am still quite new to all this and learning my trade and regularly come across situations where things don't seem to have been done correctly by previous, often more experienced accountants.

If you haven't encountered certain situations before then all the theory and study in the world won't always provide the answer. Often the guidance of more experienced hands like quite alot of accountingweb members helps point you in the right direction and build your confidence and I am hugely grateful for some of help and support I have had here from people like John.

 

Thanks (0)
By Penfold
30th Jul 2015 22:56

Learning on the job

Do your clients know that?

Thanks (0)
avatar
By soundadvice
31st Jul 2015 08:43

Absolutely they know how long I have been in Practice and what my qualifications are.

The thing is everyone learns on the job whatever job they do; there can't be many jobs where it can all be learned in books.

What surprises me as I build up my experience is some of the work done by accountants who have been practicing for many years as this case illustrates.

Thanks (0)
avatar
By paulwakefield1
31st Jul 2015 08:51

@Penfold

Have you never learned anything new since you started?

Thanks (2)
avatar
By Mr_awol
04th Aug 2015 09:03

Of course he has - we all learn on the job.

Unfortunately accountancy seems to be n area where people (particularly in, but not limited to, th bookkeeping sector) think they can do a course, and then jump straight into self employment.  Some of those people do a good job, but the vast majority are crap.  Unfortunately, Pitman an others constantly churn these people out, and we now have to compete on price despite the fact that the quality is often incomparable.

I maintain that a couple of years in practice BEFORE setting out on your on is virtually essential if you want to build a good working knowledge.

Thanks (0)