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Writing off decimals to the P&L

Writing off decimals to the P&L

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Evening all.

Settle this for me. My company has some smaller sub's with literary nothing going through the P&L other than bank charges and interest received, we're talking less than £1k per annum.

There was a small balance from the balance sheet that was to be written off to the P&L and myself and some other colleagues had coded this to either interest received or bank charges. The highest value was for 12p. Our new head of internal audit had a heart attack at this, saying we should 'find the correct GL for this'. Whilst I don't think what we do is wrong as such, do you agree that spending hours looking for where the error has occurred for such a small value is nonsense?

Answers on a post card please, or just down below would be fine.

Cheers

T

Replies (30)

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By andy.partridge
09th Jul 2014 20:12

Non specific
Write it off to sundries. If your audit department are not happy they need a lesson in business. No one in their right mind us going to congratulate you for spending £200 of company resources to find 12p.

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By carnmores
09th Jul 2014 20:20

sack the audit dept
They are immaterial to the company. No wonder small audits were abandoned jobsworths like these need to get a life

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By TMTKD85
09th Jul 2014 20:49

Thank You
My point exactly. I said exactly what both of you said to which I was met with 'having a lax attitude with nominal figures can lead to a lax attitude with larger ones'. I couldn't believe it. I've worked in Finance for over a decade and fully qualified a year ago. The gaul of this idiot made me think I must have been doing something very wrong all these years. Thanks all.

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By andy.partridge
09th Jul 2014 22:04

Lax attitude?
Yes it can lead to that if you are ill-disciplined, immature and foolish. Is that what they think of you?

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By Steve Kesby
09th Jul 2014 23:21

Are you saying...

... that with a very low value of transactions your department still managed to make an error (albeit immaterial) that needed to be written off? If that's the case then my vote goes with the man who thinks accounting should involve a modicum of discipline, and those without it should be taught a lesson.

Incidentally, all numbers, big and small, in base-10 are decimals; that's what decimal literary [sic] means. :)

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By MDK45
10th Jul 2014 07:30

What a pompus prat, excuse my language. Ask him if it's ok to destroy shareholder throwing good money after bad.

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By bernard michael
10th Jul 2014 09:18

Tell him to put it in writing cc the Finance Director - I bet he doesn't

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By cbp99
10th Jul 2014 09:46

Bank rec?

While I would not spend hours looking for 12p, I would be concerned that these items were not being picked up in routine bank reconciliations

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RLI
By lionofludesch
10th Jul 2014 09:52

Charge to Wages

Charge it to wages - specifically the Internal Auditor's wages.

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Stepurhan
By stepurhan
10th Jul 2014 10:04

Actually small difference?

As has already been said, if the number of transactions is so small, you shouldn't have a difference at all. If you can't get a bank with a small number of transactions right, what happens when you get to one of the larger companies?

But rather more importantly, are you sure it is actually a 12p difference, and not two or more larger differences that net off to 12p. I agree that spending ages looking for a 12p difference is not worthwhile. Checking for larger differences that just net off to 12p (or at least confirming that it cannot be items netting off) is very much a worthwhile exercise.

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Replying to sculptureofman:
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By jiatbanus
11th Jul 2014 17:51

Hello.

Did he not say the total of transactions was about £1k? Otherwise I accept the comment on "contra" amounts netting at a 12p difference.

   

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By andy.partridge
10th Jul 2014 10:56

That's what I used to be told

I remember being told 30 years ago, 'Oh, so you think you only have a difference of a 1p? You might have 2 differences, one a £1,000 debit the other a £999.99 credit.'

Of course over the ensuing decades I have never had that experience. It's right that the principle should be made to a junior but no adult should be made to go away and prove it.

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Stepurhan
By stepurhan
10th Jul 2014 11:16

Worthwhile exercise

I will admit it is a rarity, but I had a junior bring a bank account with exactly that problem with it once. The client in question had a loss-making period where they transferred round sums in to pay out marginally different amounts. One (almost) matched set of transactions had been missed. Capital introduced coming in and business expense going out so important to the accounts.

Of course, no adult professional should have any difference at all on their bank accounts, especially when the number of transactions are small. ;-)

 

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By sylou
10th Jul 2014 12:34

@ andy.partridge

I did have that happen once.  A client had produced their own cash book from bank statements, which I then reconciled at year end and it gave a difference of only a couple of pounds.

For some reason I did decide to investigate, and found they had omitted two transactions - a £100k ish receipt from a mortgage and the purchase of a property!

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By paulwakefield1
10th Jul 2014 13:01

Am I missing something?

I don't see anything in the OP about the bank or bank rec. So why is there an assumption that the bank rec is out? Sounds more like a virtually dormant sub, probably with a trading history, where there are some residual balances. Might have arisen from round £ year end journals or transfer of business journals which has left a few pence lying around. (You see - I can make assumptions too :-) ).

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Replying to johngroganjga:
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By cbp99
10th Jul 2014 13:30

.

paulwakefield1 wrote:

I don't see anything in the OP about the bank or bank rec. So why is there an assumption that the bank rec is out? Sounds more like a virtually dormant sub, probably with a trading history, where there are some residual balances. Might have arisen from round £ year end journals or transfer of business journals which has left a few pence lying around. (You see - I can make assumptions too :-) ).

The OP did refer to interest received and bank charges, which would have gone through the bank account. If the bank had been reconciled, I would assume that this procedure would throw up any unrecorded interest and charges, which would at that point be posted to the relevant nominal accounts. Agreed, round £ year end journals is a possible explanation, although this would be picked up on a later reconciliation.

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By paulwakefield1
10th Jul 2014 13:38

We're reading this differently

I read the OP as saying they used the Interest & bank charges P&L accounts as "dump" accounts for the small BS differences since there were no other active P&L codes which, if correct, would seem entirely sensible. So does not affect the bank or bank rec at all.

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Replying to I J Lessels:
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By cbp99
10th Jul 2014 13:41

.

paulwakefield1 wrote:

I read the OP as saying they used the Interest & bank charges P&L accounts as "dump" accounts for the small BS differences since there were no other active P&L codes which, if correct, would seem entirely sensible. So does not affect the bank or bank rec at all.

Fair enough

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By listerramjet
11th Jul 2014 11:19

procedure

so he should put his findings in a report along with his recommendations.  He will either see sense, or a P45.

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By fiairlieb1
11th Jul 2014 11:34

balancing doesnt always = good

True, a £1 difference could mean being out by £999999 one way and £1000000 the other.

However, if something balances it could easily mean £100000 out one way and £100000 the other

The need to find 12p, in my experience, is due to the fact that the manager has little or no business sense and little or no concept of risk - every minute spent looking for 12p is a minute that could be spent looking for material errors or giving assurance to management that no errors could be found. Sadly, I had little success in persuading previous internal audit managers about this concept, which is one of the reasons that i left that sad world behind me

 

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7om
By Tom 7000
11th Jul 2014 12:22

hahahahahahahahaaaaaa

If it was £12m look for it

 

Might I suggest you need a new head of internal Audit if he has nothing better to do

 

once again

 

hahahahahahahahah

 

But then what do I know ;)

Oh yes I know our audit quote will be lower than the one you have now

 

Tom

Senior Statutory Auditor

Chartered Accountant

Member Instiute of Chartered accountants

Member Society of Prefessional Accountants

Member Institute of management

25m swimming certificate

 

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Replying to atleastisoundknowledgable...:
By mrme89
11th Jul 2014 12:30

.

Tom 7000 wrote:

 

Member Society of Prefessional Accountants

 

 

 

Is that like Professional Accountants but not quite there yet?

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By raybackler
11th Jul 2014 12:28

Cash to the penny - Accounts to the pound

It is a golden rule of mine, drummed into me as  junior, that bank accounts are always reconciled to the penny.  It is slovenly to do otherwise and bank reconciliations underpin the whole edifice of accounting.

Once you know the whole edifice is not built on shifting sand, you can write off small differences arising in these circumstances.  This is often the case when accounts are produced to the nearest pound and small differences can arise, if the bookkeeping doesn't keep pace.  Whilst it is careless on someone's part to have this situation, it is not worth the time and effort looking, particularly if it has been inherited from someone else.

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By James26
11th Jul 2014 14:06

Offseting DR/CR

As above only a risk if large offsetting items.  This does happen quite a lot especially with tax sensitive journals. 

Most groups have a "Project Spaghetti" at some point to unwind "historic intra-group balances".  Usually the finance person says something along the lines of "it all nets off to a few hundreds of pounds so it isn't material" and the poor tax guy is crying or sighing depending on his disposition.  Looks at the schedule sees millions one way offset by millions the other way.  What were the balances were for (trading / structural borrowing), who they were with, were rights of offset signed/implemented, was it waived or written off by way of deed etc.

Some of that has been simplified by changes in legislation over the past 4/5 years but there are usually some tax risks in those projects.

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By jiatbanus
11th Jul 2014 18:03

Oh dear.


Bureaucracy.

Did I spell it right?

I am just completing my third year of producing and having audited a Singapore company account. Turnover SGD less than 5m. The nutter  who has put forward the 12p argument on a £1000 total matter needs to be sacked for not doing his job.

I mention Singapore because all Auditors are of this mentality and they use B-111 rules as their justification. "Coming here soon?

    

 

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By The VAT Doctor
11th Jul 2014 21:23

Ingenious

Anyone remember the Superman 3 issue, where the Richard Prior character found a way of transferring all the fractional amounts that were rounded down by the computer, and therefore effectively written off, into his own account.  Just an idea...!

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By ronlfoot
12th Jul 2014 05:58

12p

I think no stone should be left unturned to find this difference and consideration should be given to filing a money-laundering report just in case criminal activity is involved.

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By carnmores
13th Jul 2014 10:22

youre not serious

what a ridiculous suggestion

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Replying to GHarr497688:
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By ronlfoot
13th Jul 2014 17:54

You cannot be serious, man

I thought accountants were supposed to have a sense of humour these days.  Thank God I'm (more or less) out of it.

 

 

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By carnmores
13th Jul 2014 20:55

the sad tthing is Ron

that some people do think like that , I was only upping the ante :-)

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