Having recently taken over as accountant for accounts preparation for calendar year 2011 I have discovered an error in the balance sheet dated 31st December 2010
This error relates to an understatement of the bank balance as at this date.
To prepare draft accs for 2011 I have credited a suspense account pending deciding how to treat the difference.
Shall I treat the difference as a prior year adjustment in the 2011 accounts or adjust within the year?
Either way how shall I describe the difference?
There are no corporation tax issues
Thank you in advance for any advice
Replies (11)
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Why don't you ask the last accountant
You need to know what the difference is in order to describe it
Agree
As Chris says, first port of call would always be to raise the issue with the last accountant.
In other circumstances, especially if CT were an issue, I'd encourage the last accountant to prepare & submit amending accounts however, in this case, depending on the materiality I would be inclined to amend the comparatives in the 2011 accounts and add a note explaining the correction.
What's it got to do with a property management company?
A discrepancy on the bank balance could apply to any type of company.
How do you know the balance stated in the 2010 accounts is wrong? Have you asked the previous accountant for the basic handover information of a bank reconciliation? It is not for him to provide you with bank statements for 2011 - it is your client's responsibility. If the company gave the bank statement straddling the 2010 year-end to the previous accountant, get your client to retrieve their records from the previous accountant. Why cannot the company get a copy of the missing statement from their bank?
Is there something you are not telling us about this case?
The plot thickens
Being strict, this is the responsibility of the directors to sort out, your hands are tied.
If the account in question was part of the old agents' clients account, then, if necessary a threat of complaint to reg body/legal action should be made. If it was held by the company at a bank then they write to the bank and get a copy statement.
You are not auditing (I hope) and so, on a less strict basis, if the sum is not that material and all the directors agree then you merely write off the difference in the comparatives and make a simple note that the bank balance stated in the previous year's accounts was Horse's dos (in error) by £X and the correct balance is now shown in the comparative figures and the error deducted from/added to reserves.
I'm in two minds to ask but are you sure about showing service charges received in the company's bank account? (ignore if you want to!)