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Accounts don't balance by tax liability amount

Shareholder funds exceed net assets by the tax liability amount. Why is this?

Didn't find your answer?

I have:

Dr Corporation tax (P&L)
Cr Corporation tax creditor (BS)

However, shareholder funds exceed net assets by the tax liability. Is there an obvious reason for this? 

I'm not an accountant/bookkeeper, this is my own small business. 

Thanks for your help.

 

William

Replies (14)

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By David Ex
23rd Jul 2021 17:37

wpowell wrote:

I'm not an accountant/bookkeeper, this is my own small business. 

There's your problem then!

Someone may have a clue but I'm not sure anything immediately occurs to me without being able to see the whole picture.

Do you operate a manual accounting system or computerised?

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Replying to David Ex:
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By wpowell
23rd Jul 2021 19:34

Manual accounting but the profit and loss account is computerised.

There are no errors in the P+L account, I've been through it manually.

The company has a loan I made to it, bank account, one debtor and nominal fixed assets on the balance sheet + a paid dividend.

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By pauld
23rd Jul 2021 17:39

Is the CT an accrual or is it tax that has been paid?

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Replying to pauld:
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By wpowell
23rd Jul 2021 19:34

Accrual

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Replying to wpowell:
RLI
By lionofludesch
23rd Jul 2021 19:58

wpowell wrote:

Accrual

I'm guessing that somehow the liability is in there twice. Maybe once in Accruals and again in Corporation Tax Due.

Impossible to say, of course, without looking at your detailed workings.

Thanks (1)
Danny Kent
By Viciuno
23rd Jul 2021 18:00

Is your software/spreadsheet or whatever not picking up the CT charge in the P&L as a deduction to the current year's earnings when it is being pulled through to the balance sheet?

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Replying to Viciuno:
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By wpowell
23rd Jul 2021 19:35

It's deducting it from the P/L.

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RLI
By lionofludesch
23rd Jul 2021 19:08

Accounts don't balance?

Has to be something wrong with your software.

Even if the accounts are wrong, they should balance.

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Replying to lionofludesch:
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By wpowell
23rd Jul 2021 19:36

Just using excel the accounts are so simple. Obviously not simple enough!

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By The Dullard
23rd Jul 2021 19:58

My guess is that retained profits c/f in the balance sheet is the b/f figure plus the profit before tax. Should be the profit after tax.

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By bernard michael
24th Jul 2021 10:30

Have you duplicated one of the entries ??

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By rmillaree
25th Jul 2021 11:19

Are you able to remove all the entries for corporation tax this year - or reverse them out with same original dates and amounts used.

Then see if the accounts balance without the corporation tax included.

If you have balanced accounts without corporation without tax inlcuded - you know the issue relates to the corporation tax - if not you know ir relates to something completely different.

If differences goes away whjn you remove corp tax it should be fairly easy to then see where it has gone wrong when you put back in by comparing to the figures without corp tax.

changes should be
Current liabilities corp tax or other tax es increase by amount of corp tax

Retained profit this year decreases by amount of corp tax

if you were using manual system i might guess pre corp tax profit was being pulled through to the profit and loss calcs for the year that flow through to closing retained profits. If its double entry system this shouldnt happen - although you shoulkd check your chart of acounts to see if the corpation tax liability is being excluded from the acocunts produced - eg sage 50 has check facility that flags up missing chart of accounts categories - you have to go into chart of acounts and run the check though.

May the force be with you

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Replying to rmillaree:
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By wpowell
25th Jul 2021 15:43

Thanks for taking the time to write such a detailed reply.

I found the problem. The error was I had included a loan liability which shouldn't have been included until the next accounting period. The amount was coincidently very close to the tax liability.

After many hours lesson learnt, get an accountant! Do companies normally go to local accountants or in the modern virtual world does location not matter? If the latter any recommendations for a small company?

Thanks

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Replying to wpowell:
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By rmillaree
25th Jul 2021 15:55

I would say its your choice - doesnt need to be local but there are some advantages with having a real live person you can meet up with. I think you will find most accounts are pretty comfortable dealing competely remotely as long as they get necessary info - being honest they are possible happier to do everything by phone and email if client is similarly happy.

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