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How to rectify company's accounts

Company's expenses paid from director's account posted as paid by company

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I have taken over a compnay's accounts and have noticed that some company's expenses were paid from the director's bank account have been posted as paid by the company instead of being posted as director's loan.

What should I do to rectify this for all the previous years? (if anything)

Or should I just start recording the correct way from now on? The accounts will still be wrong...

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By johngroganjga
04th Oct 2019 11:59

So the company’s bank balance is wrong, and doesn’t reconcile?

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By lionofludesch
04th Oct 2019 12:02

Is this proposed adjustment material ?

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Replying to lionofludesch:
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By SouthCoastAcc
04th Oct 2019 13:38

lionofludesch wrote:

Is this proposed adjustment material ?

Definitely this

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By lionofludesch
04th Oct 2019 13:45

SouthCoastAcc wrote:

lionofludesch wrote:

Is this proposed adjustment material ?

Definitely this

Whilst not disagreeing, I'm less toey about this now I discover it's a purely balance sheet error, with no effect on profit.

If there's a s455 effect, it's likely the tax has been overpaid.

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By Finding Accounting
04th Oct 2019 12:28

Bank balance is right. The expenses were posted as cash payments.

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By Accountant A
04th Oct 2019 12:41

Finding Accounting wrote:

Bank balance is right. The expenses were posted as cash payments.

Eh? So what was the double entry then for the payments that the company didn't make??

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By Finding Accounting
04th Oct 2019 13:02

DR Expense
CR Petty Cash

End of year cash is negative by the way...

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By lionofludesch
04th Oct 2019 13:00

Finding Accounting wrote:

Bank balance is right. The expenses were posted as cash payments.

So you're saying the cash is wrong then.

We're back to the same question, really.

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Replying to lionofludesch:
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By Finding Accounting
04th Oct 2019 13:03

Yes, cash and directors loan account are wrong

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By lionofludesch
04th Oct 2019 13:14

Cash in hand negative and nobody noticed, eh ?

Ach - just correct it this year.

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By SXGuy
04th Oct 2019 14:29

Well clearly if the cash account is negative its negative by the same amount as what the dla is wrong by.

Not accounting for any other F ups which were posted to cash of course.

Journal cash and dla would be the simple answer.

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By Finding Accounting
04th Oct 2019 15:06

So is it that straightforward? Just posting a journal entry?

What about previous years accounts that are wrong?

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Replying to Finding Accounting:
By Duggimon
04th Oct 2019 15:15

How wrong are they? If we're talking a million pound hole in the petty cash tin then you should probably be sorting that but really it doesn't make much difference, you're just moving a liability from one place to another.

Who is going to be negatively affected if you don't fix the prior year accounts?

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By Finding Accounting
04th Oct 2019 15:50

ok, just wanted to be sure I am doing the right thing, the right way.

Thank you all for the advice.

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By lionofludesch
04th Oct 2019 16:10

We keep asking about materiality but we don't get much response.

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