I have recently picked up a Golf Club client to prepare accounts and company tax return. The company is limited by guarantee and also non-profit. I normally deal with your usual limited company but it seems that there are a few historical issues: Firstly the profit or loss has always been removed from the profit and loss statement via a balancing entry "income in arrears c/f" and then removed to the balance sheet. On the balance sheet the deficit is not shown in capital and reserves as a negative balance but instead included in "debtors" as "income owed in arrears". On the company tax return there are losses brought forward so I guess tax won't be an issue although it does not appear that non-member (and non-guest of member) income has been adjusted for. I am worried about company insolvency too. Can anyone advise how to correctly reflect everything and what bases to cover myself on?
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Replies (3)
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Short answer
Be professional
Prepare the accounts the way you think they should be prepared according to relevant standards, and be prepared to explain why. You could ask the previous accountant why they did them like that (and you may or may not agree with them), and you should probably talk it through with the Hon Treasurer to make sure they can back you up if needed. Once you have them in a standard format, you should be better able to answer the solvency question.
Have they got a 'life members fund'?
Accounting standards
There is no difference in the accounting principles, standards or disclosure requirements whether a company is limited by shares or by guarantee or indeed, whether it makes a los or a profit.
If the accounts never show a profit or loss, but there are losses brought forward on the company tax return, the "balancing entry" must have been written back in the tax computations. Can you get the tax computations for previous years from the previous accountant?
On the face of it, the "balancing entry" does seem a very odd way of preparing accounts, but perhaps, there is some rational explanation for it.
Members?
Is there a members agreement requiring them to contribute funds if there's a loss? Otherwise the accounting treatment does seem strange.