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Is this a Going Concern?

Is this a Going Concern?

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I'm stuck!  I hope you can help.  I am preparing a set of accounts for a limited company's for the year ended 31 March 2013.  The company's income is largely based on fees for services provided.  However, in recent years, many fee invoices issued in the latter stages of the year were in fact raised for services to be provided, over £150k in fact, in advance of them performing the works; which is of course treated as deferred income / a creditor per the Financial Statements.  That creditor is the reason why the company finds itself having net current liabilities at 31 March 2013.  I've not come across this before in 25+ years.  So, should I add a GOING CONCERN note in the Financial Statements and, if so, would the following be acceptable?:

'At the balance sheet date, the company had net current liabilities of £39,211.  Whilst the company is therefore dependent on financial support of both directors, who are also joint shareholders, to enable it to continue operations and; whilst both directors have expressed a willingness to provide financial support to the company for the foreseeable future, meaning these financial statements have therefore been prepared on the going concern basis; the following should also be noted:

Net current liabilities are resultant to deferred income, applicable to fee invoices raised by the company prior to 31 March 2013, for a period not exceeding 12-months following 31 March 2013.  As is evident from the company's Profit and Loss Account, only a small proportion, if any, later becomes subject to bad debt adjustments.  Excepting for deferred income, therefore, the position of net current liabilities would not exist'.

Any comments would be very much appreciated.

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By Sheepy306
19th Dec 2013 05:42

Keep it simple
Far too long winded for me.

I usually do something like......"The company was insolvent as at the balance sheet date. The directors intend to continue to support the company, accordingly the accounts have been prepared on a going concern basis".

Incidentally, the reason for the insolvent balance sheet is not the deferred income, that's just the correct accounting treatment, the reson is simply that the business has been making losses.

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By stepurhan
19th Dec 2013 08:16

But also a debtor?

Not sure why this is creating a problem any more than if the invoices are raised after the year end when the work is being done. If a fee note is raised then surely that creates a debtor at the same time as the deferred income creditor. Net effect on the balance sheet,nil. So if the balance sheet is overdrawn, there must be something other than the deferred income causing it.

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By BananaMan
19th Dec 2013 09:31

My thoughts exactly Stepurhan

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