How to clear a creditor entry on the Balance Sheet?
I have inherited a set of accounts from a client that deals in letting properties for landlords. There is a client account where the rent gets paid into and also a business acocunt where the commission gets transferred into and becomes the company income. This business account is used to prepare the accounts. On last years balance sheet, there is a amount in creditors within one year that says it owes 153k to the client account. I queried this with the client who assures me that no money is owed and the client account balance is correct and up to date. The previous accountant who has done the accounts for the last 3 years cannot explain the reason for this transaction as it was inherited from the previous accountant who was a alcoholic and is no longer in business or traceable.
My concern, apart from the fact that the accountant previous to me has left it on the balance sheet so long and now I have to resolve, is that if there is no money owed, then this is a false creditor and the provision will have to be released back to the p/l causing a massive increase in profit and cost the client an extra 30k in corp tax, which they have not got. Clearly, the money cannot be taken out of the business bank account against this as that would be false.
Any advise on how I should deal with this?