Can anyone help me please, I am in the process of finalising year end accounts for a client for the first time and am having difficulty with the accrued expenses that the previous accounts person did. the accrued expenses were not reversed in previous years on sage but were in the actual financial statements. so I now have an accrual left on sage how do I deal with this as if I add the accruals figure to the relevant expense accounts in the p/ then the overall p/l figure is not matching the b/s.
im not sure if I am looking in too deep into it and confusing myself so thought I should ask for help,
thanks
Replies (24)
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You reverse the b/fwd accruals back to the expense accounts they relate to. Then introduce new year end accruals.
Not sure what you mean. By definition, any new accrual you create for this year end will not include any invoices posted during the year.
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Lisa, if your boss has dumped this on your and you are not ready, then prepare a list of questions and points for review and ask them to go over it with you. Chances are they will be able to cover these points in seconds so it wont be a big problem for them. It will be a big problem if you muck it up and they have to unpick it.
From a management point of view it is unrealistic to ask someone to complete their first set of accounts in January for a client without proper support, especially if they are a bit wobbly on double entry bookkeeping, and most bosses will realise this if you challenge them gently and ask for some support.
So what was the balance on the accruals account in the nominal before your reversing entry? You say it was £1,553.28 after but what was it before?
So you need to ask whoever prepared the 2014 accounts for a breakdown of the £2,429 accruals in the 2014 accounts. Then you can move on.
Practical
Look at your accruals. If you do not believe that you need these accruals, then you reverse them back to the same account they were booked against in first place.
???
Accruals account was debited, but the expenses were untouched??? So where did the credit entry go???
If you're not able to find out the history of the adjustments, clear out the accruals against sundry expenses and move on.
Accrued expense balances
I agree with Ruddles posts.
However just check your Retained Profit account balance - should agree to the financial statements - else this maybe where your adjustment with accruals is made.
Out of interest what is draft turnover and profit or loss as at YOUR year end.
I ask because Ruddles has the best solution thus far.
eg If sales is £10,000 or less - more work is needed
if sales is £100k plus - write off as per Ruddles solution and move on
You will go mad trying to work out and correct the previous accountant's errors !( If errors exist of course )
Errors?
We are not told that there any errors. Only that the previous accountant in unable (for unknown reasons) to be contacted for a breakdown of the 2014 accruals figure so that it can be reversed correctly.
Lisacolbourne wrote “what's
Lisacolbourne wrote “what's confused me Is that the accrual reversal was not done to match the original accrual reserve, and I am unable to contact the previous accountant so am at a loss on what to do with the accrual sitting there as it has no expense account to be reversed to, thanks”
not done – error ???
Error
Lisacolbourne wrote “what's confused me Is that the accrual reversal was not done to match the original accrual reserve, and I am unable to contact the previous accountant so am at a loss on what to do with the accrual sitting there as it has no expense account to be reversed to, thanks”
not done – error ???
That was, we are told, an entry in the 2014 year to reduce accruals to £2,429 at the 2014 year end from whatever they had been at the 2013 year end
We are not given any reason to think that £2,429 was not the correct figure - only that for unknown reasons the accountant whose figure it is can't be contacted to explain how it is made up.
I dont want to appear harsh but
If you are a practicing accountant rather than an inhouse bookkeeper
Have you had any formal accountancy training?
Have you got professional indemnity insurance.
Because if you cant deal with accruals, you need to think if you are in the right job, because this is pretty basic stuff.
If you are a bookkeeper your quastions are fair enough, call the accountants and they will explain.
Accountants
If you are a bookkeeper your questions are fair enough, call the accountants and they will explain.
The whole point of this thread is that the OP can't, for some reason which has not been explained, contact the previous accountants, which is of course the obvious thing to do.
'invoices' when receieved went AP & Accruals - thus leaving the balance in accruals ? is this what occurred. In any event Current year will correctly need to be reconciled. and current year accounts will reflect a catchup adjustment to be made - if there are no matters still accrued for and not yet paid/ but payable / liable from those prior years
Out of interest are there any outstanding issues-legal or supplier account or 'otherwise items' which may account for the accrual differences
VAT, just a thought
Where the client is vat registered accruals are always treated net of vat. Where the client is not vat registered the accruals will be treated gross. A complication arises where the client is vat registered but using the flat rate scheme in which cases accruals will be treated gross. We don't know the vat status of the OP's client but given the size of the discrepancy could the treatment of vat be the reason?