Year End Adjustment

Year End Adjustment - Control Accounts

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Hello,

Hope someone can advise me on a year end adjustment query.

I do the bookkeeping for a client and I have just recieved back the year end alignment/adjustments that need to be run so the opening balances agree from their accountant. I noticed that there was a large journal entry in the adjustments directly into the Debtros Control Account.

When I took over the bookkeeping for the client they explained that they had switched from QBs to SAGE and when they did, whoever did the switch over had incorrectly entered O/Bs for most of their customers leading to a completely inaccurate debtors list, the client doesn't know what's outstanding or not. I explained all this to their accountant at the year end - I phoned to query the Debtors Conrol Adjustment in the journal and he said that it was due to the above problem that he's needed to guess what's outstanding and not based on best judgement and post year end lodgements that he has assumed was to pay debt.

My question being, is this the only way to sort this out? The Aged Debtors will always be a long way out but I don't/the accountant doesn't know which debts need to be written off etc

Anyone any advice?

Thanks!

Replies (7)

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By Chester258
19th Mar 2018 16:32

PS The lodgements post year were also bank receipts with no reference to an invoice or allocation.

I would normally raise an invoice/credit note to remove an incorrect customer balance but given that we don't know which customers' balances are correct or not I don't see how that would work.

Unless of course, I post the adjustment to suspense and then use my best judgement in determining which customers to raise invoices/credit notes to against suspense.

That would still mean that the Aged Debtors is likely in accurate.

EDIT: Probably just answered my own question/problem!

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By rhino83
19th Mar 2018 16:45

Can you just look at the QB closing balances and work out what the correct position should be?

I admit this may be some work, depending on the size of the company, but it may be worth doing.

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Replying to rhino83:
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By Chester258
19th Mar 2018 17:05

This may have been a possibility (assuming that everything was correct within quickbooks)

However, to make everything worse they recently had a fire at their offices where they lost everything including: PCs that had SAGE and possibly the old QBs system on them, all paper records etc etc

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paddle steamer
By DJKL
19th Mar 2018 16:53

What you are actually saying is you do not have a debtors' ledger merely an accounts figure that is called debtors with no idea whatsover whether it really ought to exist or not.

In practice what you need to do is either:

1. Going forward start posting all invoices , credit notes and receipts correctly to an all new debtors ledgers (new codes) with its own distinct SLCA from x date, anything received that is not re these (so you need to identify all receipts from x date-put in the graft) post to old SLCA and pray that over time the position unwinds that the eventual write off /write back is not horrendous

2. Go back into the mists and try to reconstruct- if receipts cannot be allocated correctly this likely is a waste of time.

3. Tell client this is going to cost an absolute fortune to sort-it will be labour intensive. I once, in the mists of time during my apprenticeship, needed to rebuild purchase ledgers for a chain of off licences in Glasgow (given it was Glasgow these were very busy wee places with high volumes of Buckfast) , we spent weeks and weeks on this, writing to suppliers, getting hold of all supplier statements etc, but at least we knew who each payment was to (just did not have any invoices) your challenge imho is far worse. ( I have no idea what the final outcome was re this one, I left in late 1987 but do know our time on ledger when A N Other took over from me was £8,000 and rising as we were only about 50%
through the job (As I was only earning about £5,500 at the time that was a lot of money)

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Replying to DJKL:
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By Chester258
19th Mar 2018 17:16

Essential yes, the debtors figure is at best an estimate. By the accountants own admission it is a guess based his best judgement.

Reconstructing is basically a non starter, as mentioned in the comment above, a fire destroyed everything in their offices including paper records, old accounting softwares etc.

I really don't want to post into a control account (and basically leave the underlying issue); however, posting to suspense and then trying to figure which balances may or may not exist isn't exactly ideal either.

It may be a case of contacting all the customers but most of them are very small charities/organizations/groups and may even have paid by cash so whether they are likely to have kept statements/records back to 2014 is another question.

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Replying to Chester258:
paddle steamer
By DJKL
19th Mar 2018 17:37

I think route 1 is your only hope, if you can get new system to work correctly, identifying which invoices all receipts from x date onward are paying (contacting payers as you go for remittance advices/breakdowns) and where not for new invoices post to old SLCA the position will likely unwind-whether anyone likes the picture when it emerges is another matter.

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By andy.partridge
19th Mar 2018 18:12

In short, you need to identify a balance under the old system that was known to be accurate. Add the sales since then and deduct the customer receipts. That will give you a the current balance. In your analysis it shouldn't be too difficult to identify which invoices make up the closing balance.

In my opinion you shouldn't go to any trouble to balance back to the accountant's figure if the accountant is only guessing. That is no good to you and no good to the business that will want to engage in some credit control.

Make sure you have got it right for the next year-end and the accountant will have to justify their own adjustment to balance back to your numbers.

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