Removing non-existent debtors

We've taken on a client who switched accountants to us as they weren't getting a decent level of service; it's been over 3 months but we've finally just about got the professional clearance documents.

The accounts are showing debtors of ~£3000. We've been through the last two years, and there are no debtors, so we're convinced that it's not right. We've reconstructed the sales ledger and have proved the turnover figures are correct for the last accounts completed. It's not obvious what else could be wrong to get the debtors wrong. It's a very simple one-man-service-business limited company and there were definitely no debtors. No accrued income. The previous accountant says the debtors are sales invoices, but all invoices were clearly paid into the bank in the year, so there are no trade debtors.

They're on flat rate VAT so we have taken that into account as well, and that doesn't explain it either. The bank is reconciled.

We are stumped. The previous accounts balance, but they are wrong. All the other figures on the balance sheet and P&L look reasonable, nothing else leaps out as to where the other side of the error could be. I don't expect the previous accountant to either assist further or re-do them.

The correct answer is of course to get us to re-do the last accounts but of course the client may not wish to pay us to re-do them when they've already paid someone else to do them, and been fined £375 for late filing of the accounts through no fault of their own (and are unlikely to get their money back or make a complaint; for reasons I don't want to go into please take my word on this).

If the previous set of accounts are not re-done, from a taxation persepctive it will be the client out of pocket not HMRC, so there is no tax evasion/ MLR issue here.

My question is this: If the client won't get the previous accounts re-done, where would you put the debit to get rid of the debtors? The only solution I can think of is bad debts, and add back on the tax comp, but this will exacerbate an overdrawn directors loan account (due to reduction in reserves and thus dividends). Or carry the figure forward? Definitely not correct.

Any ideas?

Comments
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Ask the client

Roland195 |

Alas

Monsoon |
Monsoon's picture

Unbilled work? or......

UK Tax |

stand back

pembo |
pembo's picture

Ask the old accountant

andy.partridge |
andy.partridge's picture

You may not like the answers

Roland195 |

Just a thought

Moulsham |

Unbilled / accrued work B/F C/F B/F C/F ...

Mouse007 |

Thanks all

Monsoon |
Monsoon's picture

And more...

Monsoon |
Monsoon's picture

afterthought reading mouses comment

pembo |
pembo's picture

Only one option left

Mouse007 |

Only one?

Monsoon |
Monsoon's picture

Only one

Mouse007 |

Good point.

Monsoon |
Monsoon's picture

monsoon- Debtor balance

twickers |

Get the old accountants file ...

Old Greying Accountant |
Old Greying Accountant's picture

Is there any mutual trading?

Marion Hayes |

did client issue any credit note to customer?

zaidi |

OGA, I think I love you :)

Monsoon |
Monsoon's picture

Fwightened ...

Old Greying Accountant |
Old Greying Accountant's picture

One more option ...

bigdave1971 |

If it's not already covered

bernard michael |