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Balance sheet error

Balance sheet error

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Evening, below is my balance sheet that is not matching up. I could not copy and paste my balance sheet as it would  not let me so I have re typed it here so excuse any typos. The issue seems to be with the depreciation of the tangible asset. Somebody please help? Also, is depreciation an administrative expense or can I claim this somewhere else? or can I just claim 20% of the depreciation amount? where would I do that?

Turnover    ac12         £19,535

cost of sales     ac14   £11,338

gross profit     ac16       £8197

Distribution costs    ac18       £730

admin expenses      ac20     £1618

other operating income    ac22   £ 0

operating p/l     ac26       £5849

interest receivable      ac28       £0

interest payable      a30          £0

profit on ordinary activities before tax   ac32    £5849

tax on ordinary activities    ac34       £1170

p/l financial year    ac36        £ 4679

dividends paid   ac38         £ 0

net balance transferred to reserves    ac40   £ 4679

intangible assets    ac42      £ 0

tangible assets    ac44    £1948

total fixed assets    ac48   £1948

stocks      ac50   £ 0

debtors  ac52    £ 0

cash in hand and bank  ac54        £ 5849

total current assets   ac56      £ 5849

creditors within one year       ac58    £1170 (tax bill)

net current assets   ac60     £4689

total current assets less liabilities   ac62   £6637

creditors after one year    ac64  £ 2500 (purchase of van from myself, directors loan. has depreciated 552 since purchase. None of the original debt has been paid)

provision for liabilities    a66    £ 0

total  net assets    ac68     £4137

called up shared capital      a70      £10

revaluation reserve  ac76         £ 0

profit an loss account      a74     £4127

total shareholders funds    a80    £4137 (profit after tax, plus 10 paid shares less 552 depreciation on the van)

reserves at 14/10/13 a184   £ 0

profit for the year  ac185    £ 4679

equity dividens paid  ac186   £0

retined profit  ac187    £4679  (error retained profit at 31/03/2014 must tally with the value in the balnce sheet.please check and amend entries

Replies (18)

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By johngroganjga
02nd May 2014 22:17

The depreciation charge for the year should be in the expenses and reduce your profit. If you have left it out that is probably why you don't balance. That is all you are going to get from me I'm afraid. You clearly do not have sufficient understanding of double entry to be doing your own accounts. Get an accountant.

Thanks (4)
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By MDK45
03rd May 2014 07:38

This is basic bookkeeping errors, you'd be well advised to get an Accountant.

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RLI
By lionofludesch
03rd May 2014 09:42

Sound advice

Out of your depth, I'm afraid.

Who knows what other errors are in there ?

And you can't "claim" depreciation.

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By tonyh
03rd May 2014 14:59

Reasons why it does not balance

Could be your stock, or your petty cash, or your bank balance, or your sales ledger control,or your purchase ledger control. Does your nominal ledger reconcile. How have you dealt with the accruals. What about the share capital and the directors loan accounts. Are you sure that you have included all your expenses in the P&L account.

What about returns and refunds.

Just a few suggestions to help you balance your balance sheet and help you make the tax man  satisfied that the accounts are accurate.

Good luck.

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By Sandnickel
03rd May 2014 16:08

Agree with John

The depreciation is an admin expense. Just one thing that stood out to me, on the face of it your tax looks like a straight 20% of the profit. This is potentially too high as there may be adjustments to the profit to get to a taxable figure.

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Replying to carnmores:
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By andy.partridge
03rd May 2014 17:10

Or

Sandnickel wrote:

The depreciation is an admin expense. Just one thing that stood out to me, on the face of it your tax looks like a straight 20% of the profit. This is potentially too high as there may be adjustments to the profit to get to a taxable figure.

Or potentially too low! Who knows? Appoint an accountant, pronto, and save yourself a lot of grief. Do you want it done properly, or are you really not that bothered?
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Replying to Wanderer:
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By mickyb84
04th May 2014 23:36

if i wasnt bothered i wouldnt ask for help

andy.partridge wrote:
Sandnickel wrote:

The depreciation is an admin expense. Just one thing that stood out to me, on the face of it your tax looks like a straight 20% of the profit. This is potentially too high as there may be adjustments to the profit to get to a taxable figure.

Or potentially too low! Who knows? Appoint an accountant, pronto, and save yourself a lot of grief. Do you want it done properly, or are you really not that bothered?

 

Of course I am bothered but my profits are low as I am building a client base and I would much rather learn and gain extra knowledge. I see nothing wrong with wanting to better myself. If people are against helping, then it's fine. I understand that.

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By Bluffer
03rd May 2014 18:20

I agree with the others, .....

..... you do need an Accountant.

Assuming that you've copied all of the figures correctly (and I'm not certain you have), it does appear it is the depreciation that has gone wrong.

Your figure for cash at bank is the same as your profit before tax. This would seem to indicate that all of your income and expenses have been received/paid by the year end (hence no debtors and no creditors other than the tax bill and the loan from you). 

It would also seem to indicate that the depreciation hasn't been entered properly - the asset itself has been reduced by £552 but where is the other side of the entry? If you've managed to charge it the profit and loss account currently standing at £4,127 then you've gone wrong. It should be charged to administrative expenses.

Once your accounts balance, you've reached the end of step 1. There are many other steps required before you've prepared an accurate set of accounts fit for purpose. Then you have to make tax adjustments before the Corporation Tax can be calculated.

If I need some electrical work doing in my home, I don't do it myself!

Get an Accountant!

 

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By mickyb84
04th May 2014 23:30

You all make so many assumptions that I have done things incorrect. Yes I am learning myself because that is what I want to do, understand and learn. Also my profits are not great. What I don't want is 7 messages from people unwilling to help. If you simply do not want to help then why bother wasting your time. I am only trying to better myself.

 

There are things I still need to learn but I have plenty of time before the return has to be in and I have done pretty well learning so much so far.

 

You get someone in to fix your electrics or your boiler because you get one chance to get it right before you flood your house or electrocute yourself. Getting figures wrong that you have wrote down on a piece of paper is a completely different ball game. Lots of chances with no harm done. A man wanting to learn asks for a little help, its understandable if you do not wish to help but don't waste your time putting me down. Thanks to anyone who gave some helpful insights.

no materials or invoices were outstanding. everything owed in and out was paid. The depreciation has been charged to admin expense which I had previously done before, what I didn't do was ad it back to the cash in hand or bank which is where I believe I went wrong. If not I am sure I will get another 7 messages off people having a pop.

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Replying to Wanderer:
Stepurhan
By stepurhan
06th May 2014 09:13

Who is assuming?

mickyb84 wrote:
You all make so many assumptions that I have done things incorrect.
You are making many assumptions that you have done things correctly. People who know accounts have pointed out some things already you have done wrong, and the potential for others that are less obvious.

Quote:
You get someone in to fix your electrics or your boiler because you get one chance to get it right before you flood your house or electrocute yourself. Getting figures wrong that you have wrote down on a piece of paper is a completely different ball game.Lots of chances with no harm done.
Until you submit the figures. Then you are potentially in big trouble if you have cocked it up.

To take your boiler/electrics analogy your "lots of chances" are akin to looking at the pipework/wiring, maybe turning some valves/switches on and off. No harm done because you are not really doing anything. It is when you start actually doing something, like submitting figures, that things can go wrong. With your accounts this could be as minor as missing out on an available tax saving, or as serious as triggering a full-scale investigation by HMRC.

Incidentally, this is a forum for professionals, not for business people. That you have received any advice at all is more than you should expect. If you find the tone of responses not to your liking, perhaps someone paid to give you accounting advice would be more polite.

Thanks (9)
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By Sandnickel
05th May 2014 08:31

OP
Every comment above has been helpful. Nobody can tell you exactly why the accounts don't balance without seeing the underlying records,however you have had several pointers as to where you can look. I think that is more than helpful.

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By Bluffer
05th May 2014 08:58

OP's post of 04/05/2014.....

... is not a good way to obtain the additional help he's looking for.

I won't be wasting my time any longer.

Well done though for wanting to learn how to keep your accounting records. There are many small business owners out there that just can't be bothered to acquire such knowledge.

Good luck.

 

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By Foxman
05th May 2014 12:18

It depends on what you are trying to achieve. It looks like you have added back the depreciation to arrive at a figure for calculating the tax which has changed your "operating p/l." If you want the balance sheet to balance then you need to put the depreciation charge back into the admin expense. When doing your tax calculation add back the depreciation and take off your capital allowance, which is separate to your p&l and b/s.

Therefore:

GP 8197 (as stated)

Dist 730

Admin 1618+552

Operating p/l 5297

Tax 1170 (as stated)

p/l financial year 4127

Balance sheet then becomes:

Van 1948

CIH 5849

Total 7797

CL (tax) 1170

NCL 2500

Ret Ears 4127

Total 7797. 

I haven't include the share capital in order to balance it. It depends what you did with the corresponding entry with the share issue. Most likely nothing and therefore you owe the company £10. Increase your bank by £10 and include share capital of £10 and the thing will balance.

As others have suggested you would benefit from professional advice for at least two reasons. The first is it doesn't appear you have used any capital allowances for the van and more importantly you should consider some tax planning. If this is your only source of income then why no director's remuneration (unless included in cost of sales)? By claiming a £5000 salary your CT bill would be almost nothing.

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By peterk
07th May 2014 14:24

Best use of your time

It's great that you want to keep your records in a usable format, but my advice to you would be to concentrate your energies on what you're good at.

I don't know your trade - from your posts possibly a plumber or electrician - but when trying to get your business going and growing, it's important that you concentrate on that, leave the mundane accounts work to someone who can do it.

If you cost out your time at say £50 per hour, if you spent more than 10 hours on the accounts for a business with your turnover you would be much better off employing an accountant!

Good luck with your business - concentrate on the core and let others help you to succeed.

 

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By raybackler
07th May 2014 14:37

Capital allowances and work in progress

Your tax is 20% of your profit, which is wrong.  You sold the van to the company for £2500 and you are entitled to a capital allowance of 18% of the reducing balance each year, which is £450 this year, with £2050 carried forward to later years.  The taxable profit from what you have given us is £5849, but with the capital allowance it is £5399, so 20% of this is £1079.80, not £1170.

If you had bought the van from a third party, you would have had a 100% Annual Investment Allowance, but because you bought it from yourself, you are only entitled to a Capital Allowance.

Did any customers owe you money at your year end?  Had you done any work that was not yet invoiced?  Did you owe any money to suppliers where you had not paid the bill by your year end?  Did you pay for anything that covered a period beyond your year end like insurance or telephone rental?  Was there anything at year end that should have been accrued, like electricity, where the bill didn't arrive until after your year end?

Many untrained people doing bookkeeping do it on a receipts and payments basis, which is correct up to a point.  The accounts have to be adjusted by the above factors and then there has to be a tax computation, which has further adjustments to remove non allowable things in the accounts like depreciation and add in allowable things like capital allowances to get to the taxable profit, which is not the same figure as the trading profit in the accounts.

I can only echo the advice on here to get an accountant.  There are some very smart people giving advice on this forum and if they recommend getting an accountant, it is because they can see what you have presented is full of holes, easily noticeable to the trained eye, but full of pitfalls for the amateur, no matter how gifted.

 

 

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By redboam
08th May 2014 15:30

Depreciation and corporation tax

As others have pointed out here depreciation is charged as an overhead to the profit and loss account. Unlike other overheads though depreciation does not attract tax relief.

http://www.figurewizard.com/balance-sheet-forecast.html

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By omg
13th Sep 2014 14:16

Same thing happened to me

http://www.andrewstechnology.co.uk/reference/tips/45-ct600-retained-prof...

I came across your query as I was having the same problem....... I have attached the link (above) which sorted me out, it seems there is a glitch in the system. (probably to make it super hard for us so that we have to employ an unhelpful person such as the ones that have replied to you)

I was really dissappointed with the tone of the answers received from the so called professionals, I do not work in finance, however if I was as unhelpful in my job as some of these people have been to you, there would be catastrophic consequences. Hang your heads in shame, you lot.

So I'm sending you hugs and smiles and huge congratulations that you have so far managed to get as far as you have with your accounts xxxxx well done you ! and I hope the link helps.

 

 

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Replying to paras007:
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By JHC
16th Jan 2016 00:51

Thank you omg

We too have had this exact same issue and the above link has resolved the issue. I too have been disappointed at the tone of some of the replies but Thank you omg!

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