hi every body.
I recently got my first company accounts from my accountant. The figures are in negative can any body tell me if this is right?
Fixed Assets 6,042..19
Current assets 13,645.37
Prepayments 8,426.25
Current Liabilities 0
Liabilities-1 year above
Directors loan 41,765
- 13,651.19
Capital and reserves
Called up capital 1
Profit/-loss -13652.19
-13,651.19
Thanks
Replies (24)
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I don't know
Ask your accountant. Nobody here can comment without verification of the figures to third party information.
The one good thing is that the Balance Sheet balances.
.
Yea I writing to confirm the balances I have written.
Can the figures be negative in assets and liabilities?
Well they look like they could be right, yes. As I say nobody can verify this information without the Accountant's working papers.
To answer your question, yes, you can have negative assets. This means that your Company is insolvent at the Balance Sheet date. Gladly, the reason for it being so is because it owes you (assuming you are the Director) around £41,000. If you suspect that the Company could never owe you that amount of money, then you may wish to speak with your accountant to get a break down of that balance to review it.
The negative value
The "bottom line" negative value of £ 13,651.19 indicates that from date that the company was formed up to the date of the Balance Sheet losses have been incurred (costs have exceeded income) consequently creditors exceed assets. The main creditor is (are) the director(s) to the tune of £41,765.
This £ 13,651.19 is £ 13,652.19 of accumulated losses less share issued of £ 1.00.
There should be a note somewhere in the accounts above "reserves movement" and most commonly on a separate page (*) a schedule set of figures summarising the latest years profit and loss figures.
Having a "negative Balance Sheet" could make it difficult for the company to obtain credit.
(*) This format is a bit disjointed (but is followed by most accountants), if your accountant is "on the ball" and customer-focussed at making the accounts more understandable he/she would show reserves movements and dividends further down the the summary Profit and Loss page rather than as a disjointed note several pages after the Balance Sheet.
No really, ask your accountant
We can confirm the figures add up, but you could do that with a calculator. Add the assets, deduct the liabilities.
Honestly, if you have concerns about the accuracy of the figures then ask your accountant.
The business has made a loss.
First if all, this is NOT unusual in the early years of a business. Is it what you expected?
Have you (as director) been injecting funds into the company? If you have, these funds are shown as liabilities on the company balance sheet, ie a negative amount, as the company owes the money back to you.
The company has spent more than it has taken in through trading. How has it managed that? The answer is you have funded it.
The accounts look fine to me. Certainly no reason to suspect they're wrong prima facie.
Disagree
That's semantics not syntax. And in many contexts, including this one, "right" and "correct" are synonyms.
Oh dear
However, I've no desparate need to raise your, obviously low, standards.
Not sure if you mean desperate or disparate. Please explain.
I have given up ...
... worrying about syntax, especially since the interweb - the pervasive spread of American English makes it futile!
directors account
its the directors account causing this
you've made a £14k loss , its been funded by directors account
issues are
1.trading whilst insolvent, could make you personally liable if other creditors lose out if you are wound up
( but at moment only creditors are the directors)
2. difficult to obtain credit
3. some directors would add a note to say they will support company to extent of their loan for the next 2 month or so
4. some would capitalise directors loan as share capital
5. you cannot take dividends
(some people will tell you how cloud accounting is wonderful .. but in reality it is truly stupid and expensive and will not give you this sort of information)
Creditors
I'll assume the bank balance is included within current assets but I'm a bit surprised there are no creditors for the business bar the director's loan account.
The accountancy fee for example is usually a creditor as we only bill this after the year end and if this has been paid by standing order in full before the year end then I would suggest that this monthly payment needs to be lowered.
Eh?
I'll assume the bank balance is included within current assets but I'm a bit surprised there are no creditors for the business bar the director's loan account.
The accountancy fee for example is usually a creditor as we only bill this after the year end and if this has been paid by standing order in full before the year end then I would suggest that this monthly payment needs to be lowered.
For starters plenty of firms operate on monthly standing orders / DDs now so the accountancy creditor is not necessarily expected. But what I really don't get is why the monthly payment needs to be lowered? What am I missing here?
Direct Debit
I'd expect the direct debit to be pretty much covering the accounts fee at around the time the bill is raised (and accounts then completed), rather than at the year end.
If the accounts have been completed for example a month or so after the year end then perhaps this isn't a problem but if the accountant is doing them say six months after the year end then I feel it is pretty poor practice to have taken 18 months worth of fees from a client by the time you have only just completed the first year of accounts.
Disagree
And if the client is so lax at providing information that six months after year-end you've done a lot of work but not quite finished because you're still waiting for that final query? Should you really be made to wait even longer for fees? I don't think so. If they've paid up by the time their year is up and provide me with all the info straight away they can have their accounts within a month of year-end (or probably quicker). My clients pay on a monthly basis throughout the year, it's not a lump sum, and it's a fixed fee, not based on how long I've spent at a point in time...
Flash
In your example, I would send a client a copy of the draft accounts with a fee note. This could be if I am waiting for them to confirm a stock figure for example.
I have a client now for example who has just given me his accounts with a year end of November and let's say his annual fee is £1,200. If I made him pay £100 per month from starting I would be at present £2,000 to the good in fees for work I have yet to start. Is this fair?
Suppose, instead of the client bringing me his accounts, he told me he is leaving me for another accountant. I then have to find his £2k to give back to him as well unless of course I try and come up with some ridiculous notion that I represented him this year and so should still be entitled to my fee even though I haven't done any work (a small fee might be applicable of course for advice, payroll etc)
I prefer to bill my clients personally when I have done the work to avoid such issues. I accept that DD is what some accountants prefer and I respect that but do feel that a direct debit should be set up to be clearing the accounts fee when it would be expected to be raised rather than at the year end.
Yes
In your example, I would send a client a copy of the draft accounts with a fee note. This could be if I am waiting for them to confirm a stock figure for example.
I have a client now for example who has just given me his accounts with a year end of November and let's say his annual fee is £1,200. If I made him pay £100 per month from starting I would be at present £2,000 to the good in fees for work I have yet to start. Is this fair?
Suppose, instead of the client bringing me his accounts, he told me he is leaving me for another accountant. I then have to find his £2k to give back to him as well unless of course I try and come up with some ridiculous notion that I represented him this year and so should still be entitled to my fee even though I haven't done any work (a small fee might be applicable of course for advice, payroll etc)
I prefer to bill my clients personally when I have done the work to avoid such issues. I accept that DD is what some accountants prefer and I respect that but do feel that a direct debit should be set up to be clearing the accounts fee when it would be expected to be raised rather than at the year end.
If the client's year end is November and you've only just had the accounts then yes it's perfectly fair that you're already up £2k - why can't they get the stuff to you quicker? You've probably done work throughout the year in which case surely it's unfair that the client hasn't paid you anything? They might go to another accountant and then you're trying to find him to get him to pay you what he owes you for the work done!
Each to their own. If it works for you that way then that's great. But I don't ever get bad debts and that's important to me. I know that when I'm starting the work I've already been paid so I can relax. My clients are happy that they're not having to find a lump sum in one go, I'm happy that I'm earning money throughout the year.