BS not balancing - The Book-keepers Forum (UK)

Catty · Member

BS not balancing

Scrat · Veteran Member

Hi Allison,

Just had time for quick look. Your ETB must balance after adjustments.
ETB you provide doesn't balance and appears to be incomplete, eg where is opening stock figure? In your ETB:
Ledger columns must balance,
Adjustments columns must balance,
P&L columns must be made to balance by addition of balancing profit/loss figure,
BS columns must balance with inclusion of calculated profit/loss figure.

Once you are that far, building P&L a/c and BS is just a case of transcribing figures.

Phil

Catty · Member

Thank you for the advice Phil.
If you double click on the ETB (in the attachment) you'll find that you can scroll up and down. You'll also then notice that I managed to balance the ETB and if you scroll up you'll locate the Opening Stock figure (stock 35 0000.00).
I will have another look at my P&L though.

Thank you for looking
Allison

Stardoe · Guru

Hi Allison,

You definitely need to look at your depreciation figures in the BS and the amount you have included for Motor expenses in the P & L.

Pauline

attilabenko · Guru

hmmm. i never worked wih bad debt provision but did you transfer it to p&l and put it on bs at the same time?! is it not one or the other? (rather bs)

Rhianrach · Expert

Weird but this is exactly where I'm at with my studies.

It appears you DR an expense in the profit and loss and CR provision for doubtful debts in the balance sheet to off-set the debtors account without taking it out, or so it seems.

Saying that I'm just about to ask the tutor about it as the book is quite sketchy. evileye

Nope I'm wrong again that's for adjustments the provision just shows as a CR to the balance sheet (should be a figure BD from the previous year. However if you adjust it then you show this in your P+L and B/S.

-- Edited by Rhianrach on Monday 1st of November 2010 08:23:00 AM

-- Edited by Rhianrach on Monday 1st of November 2010 09:40:29 AM

Stardoe · Guru

Bad debt provision is a credit balance and is deducted from the debtors figure in the balance sheet.

If it is increased (say to a percentage of total outstanding debtors at the end of the year) then the amount of the adjustment is credited to the total provision and debited to bad debts in the P & L.

It's the depreciation on Allison's BS that I'm worried about. It seems a bit strange that there is already a figure for depreciation in the initial TB which doesn't seem to relate to any of the fixed assets?

Pauline

Catty · Member

Thank you SO much for looking and helping me to figure this one out (no pun intended!)

Pauline I think I see what you are trying to say. Just to explain it from my side:
On the original TB It indicated the following Balances

Account Debit Credit
Plant & Machinery                              50 000.00
Plant & Machinery Depn                                                           3 485.00
Furniture & Fixtures                           16 900.00
Furniture & Fixture Depn                                                               93.00
Motor Vehicles                                    20 300.00
Motor Vehicles                                                                           2091.92

And further down
Motor Expenses                                         67.50
Depreciation                                           1009.92

Now in question 7 I was asked to work out the depreciation relating to the TB given, for
P& Machinery Asset life = 5years
Furniture & Fix Asset life = 10 years
(straight Line Method)
and Motor Vehicles Asset annual charge = 33%
(reducing balance method)

So whilst doing this assignment I kept refering back to my manual for some examples and indications. Looking at the B/S it shows (in the manual) that I should use the Net Book Value to calculate the Fixed Assets (is this incorrect?)
Also the Depreciation Provision used in my P&L is the new balance on the ETB after the correcting the above mentioned Depreciation Values.
HOWEVER, I am not entirely sure how (looking at the original TB as indicated above) the depreciation value could be £1009.92 if the fixed assets' depn totals to much more than that. UNLESS it was BD from the previous year? confuse

Pauline, do you think I have somewhere used incorrect figures, or miscalculated the depreciation? Or maybe I'm just not getting it! disbelief

Stardoe · Guru

Hi Allison,

Yes you use the NBV as your total for fixed assets in the BS. You show the initial cost, less accumulated depreciation to get the NBV. The key word being accumulated. You must deduct the accumuated depreciation from the cost of the fixed asset, not just this year's amount of depreciation. You have got this correct in your extended TB (final column) but have not used these figures in your BS.

What I find peculiar is the existing amount of depreciation on the P & L and the existing depreciation provision figures for the FA. They don't seem to tie in with any of the calculations for depreciation that you were given. The amount of £1009.92 can't be an amount b/f from the previous year as all totals in the P & L are transferred to retained earnings at the end of the year.

The motor expenses figure of 67.50 should be 222.50 as in your TB. (From the omission journal from the suspense account).

Is there any way you can post the inital question itself so that I can have a go for you?

Meanwhile...back to work! lol

Pauline

-- Edited by Stardoe on Monday 1st of November 2010 11:42:41 AM

-- Edited by Stardoe on Monday 1st of November 2010 11:43:16 AM

-- Edited by Stardoe on Monday 1st of November 2010 11:57:45 AM

Scrat · Veteran Member

Hello Allison,

Your ETB attachment is just a viewable object on my system, it doesn't respond to a double-click on my pc - maybe you are using a recent version of Excel and my 2003 version of Excel can't handle the format? confuse

Like Pauline, I'd be happy to do the exercise from scratch if you post the original info+questions. Unlike Pauline, I can't work yet as my practice licence application is sitting on my desk cry

so I have some time at the moment.

Phil

Stardoe · Guru

Is this turning into a race Phil, to see which one of us can get the answer first?! lol

Pauline

Scrat · Veteran Member

Yeah, I think Allison is a tease!

I had planned to register my business, design business cards, etc today but my accountant friend, who is helping me set up shop and who's brain I want to pick about business name, is on a course today - so I've lost the day cry

.

Solving this query would have been a nice distraction. As it is, the sun just came out so think I might scoot off to Harrogate to do some clothes shopping this aft, so you have no competition until this evening - I'll be checking your answer though Pauline wink

Phil

Stardoe · Guru

Many thanks Phil Lol

Enjoy the shopping!

Solving other people's problems is good practise as well.

Pauline

Catty · Member

hahaha! you guys made me chuckle biggrin

I will post the complete Q's and will try and save the file in an earlier format.

Thank you so much Pauline for bringing up the error on motor expences. I cannot believe I made such a stupid mistake!!

Will post the Q's now

Catty · Member

On the original TB It indicated the following Balances

Account Debit Credit
Plant & Machinery                              50 000.00
Plant & Machinery Depn                                                           3 485.00
Furniture & Fixtures                           16 900.00
Furniture & Fixture Depn                                                               93.00
Motor Vehicles                                    20 300.00
Motor Vehicles                                                                           2091.92

Insurance                                                 255.00
Electricity                                                1252.00
Motor Expenses                                         67.50
Depreciation                                           1009.92
Suspense                                                 155.00

Q7. The following questions relate to the Trial Balance information provided.
Show the journal adjustments for:
(a) Depreciation:
Straight Line Method
Plant & Machinery Asset Life = 5 years
Furniture & Fixtures Asset Life = 10 years
Reducing Balance Method
Motor Vehicles Asset annual charge = 33%
(b) Prepayment:
Insurance, 2 months at £100 per month
(c) Accrual:
Electricity, total accrual = £300
(d) Bed Debt Provision:
Calculated at 3% of total Debtors

Q8. Show the correcting journal to clear the suspense account of a Debit Balance of £155 which should have been posted to the motor expenses account

Q9. Prepare the Extended Trial Balance showing the adjustments made by Q7 and   Q8.

Q10. Prepare the Profit & Loss and Balance Sheet from the Extended TB.

Stardoe · Guru

No problem Allison....we've all done it ! It is so easy to overlook things like that. I have finished work for today and am about to wend my way home...lol

Look forward to the questions!

Pauline

Ooh, we must have posted at the same time! lol When I've had lunch I'll have a look

-- Edited by Stardoe on Monday 1st of November 2010 01:21:56 PM

attilabenko · Guru

Hi,

Ok so bad debt provision was created in this period that's why the p&l and BS.
What about your NBVs? You should be doing your BS from your ETB so I would think your NBVs are not correct plus in the MV dep. you have probably two mistakes...

Stardoe · Guru

Hi Allison,

Well, it's taken me a while, but I have succeeded in getting it to balance

Gives you a real sense of achievement

Question is now is how much information do you want as help?

The depreciation is definitely the error, therefore the NBVs are incorrect, plus a couple of little extra things. The depreciation is really tricky actually. Let me know if you want tips or the whole answer?

Pauline

Catty · Member

Thank you SO much Pauline!! Right - if you could possibly mention to me how to sort out the depreciation. I'm asuming my error is within the calculation, and perhaps if you could tell me what the error in the calculation is?
The couple of extra things..... confuse

Would those be calculations or entries put down incorrectly on the P&L or B/S (dr instead of cr and vice verca) Or even accidental figure mistakes?
Feels like I'm playing kind of pictionary here hahaha...I really want to make it work without it being handed to me on a plate.
If I seriously cannot figure it out after you've given me tips I may have to ask you for the answer - which I'm going to aim not to do!!!! evileye

Thanks Pauline!

Scrat · Veteran Member

Well done Pauline, had every confidence in you

Hey, you did it before 6pm too - that must be the beauty of self-employment, client work can wait when there is something more interesting to look at, I'm looking forward to it!

My brain is all shopped out, also I now have a new Blackberry Curve 8520 to learn how to use (bit of a step up from my 5-year old Nokia) so I don't think I'll be tackling Allison's question today

Phil

Stardoe · Guru

Hi Allison,

OK, just got to wash up the dinner things and then I'll be with you

Phil, I usually only work till about 1:30 at clients each day and then sometimes do a few hours at home as well in the afternoon. Self-employment really suits me as you can make your own hours virtually and you get the variety of work which really helps with the experience.

You said that you have your practice licence application ready to complete, well I don't have one yet. I may work, but was already working for a couple of clients before I decided to do the ICB exams. I'm currently 3/4 of the way through Level III manual which I hope to complete before January and then I will be upgrading my membership from Student to Member

Pauline

Scrat · Veteran Member

Hi Pauline,

You must have registered for MLR supervision with HMRC direct, I wonder now if perhaps that's the approach I should have taken? Ah well, what's done is done.

Phil

Stardoe · Guru

Hi Allison,

Right, the depreciation is quite tricky and to be honest, not even sure I understand it myself....lol

You have calculated your Plant & Machinery and Furniture & Fittings correctly, i.e. 10,000 and 1,690, but not the motor vehicles. The amounts that are in your original TB for depreciation provision are amounts that have been partially charged for the year, therefore you should work out your Motor Vehicle depn based on 20,300 x 33% (6,699.00) not 20,300 - 2091.92 x 33%.

Then bearing in mind that these are the depreciation provision figures for the year - 10,000, 1,690 and 6,699 you should make journal adjustments to bring the figures on the original TB up to these figures. (I hope I'm explaining myself ok here, sounds muddled to me!) When you have worked out the adjustments, obviously the total of these credit figures will be debited to the depreciation a/c in the P & L. You already have a total of 1009.92 in this a/c so the total figure will be added on to this to make the depreciation figure for the final TB.

In Q8 on the document above you have your journal the wrong way round for Motor expenses and suspense. Should be credit suspense and debit motor vehicles. (Thought you had it right before...lol)

Look again at where you've included Distribution and carriage. This is carriage you've charged to the customer when selling goods, which is usually added to the sales invoice. It is a credit entry, so it would not be a minus figure in expenses.

It doesn't make a difference to your end net profit, but I would put Direct Expenses above your Other income.

On your BS you haven't calculated the total of Current Liabilities correctly.

Just a bit to get you started. Hopefully I haven't confused you further cry

Pauline

Stardoe · Guru

Hi Phil,

No, I am registered with the ICB for MLR. When I explained that I was already working they told me they could issue me with a Supervision Licence. So that's what I've got

It's valid until the end of January 2011 so that's why I'm trying to get my Level III completed before then so that I can then apply for a Practice Certificate

Pauline

Catty · Member

Thank you SOOOOOO much Pauline!!! biggrin

I saw your message and immediatly delved into it so I'm so sorry that I have not yet responded.
Well it makes sense what you say about the depreciation for MV. I think the reason why I worked it out the way I did was based on the assumption that the previous year's depreciation was already worked out and therefore I subtracted 2091.92.
Now I have corrected this and corrected the journal entries figures for MV to 6699.00 (that right?)
Also on the ETB I have added the new total of the depreciation figures to 1009.92, which will then change to 18389.00 (which is the new total that will be on the P&L)

As far as the Motor Expenses acc is concerned: they say it should have been posted to the motor expenses account (dt entry of 155.00 in suspense account)
Should it therefor be added to the existing 67.50? So therefore my ETB entries are correct but the journal entry is incorrect?

Just another question about Distribution and Carriages, I'm a little confused with that one because on the TB all other expenses are debit entries and Distribution & Carriages is a credit antry. So how come it will not be a negative on the P&L? confuse

I cannot thank you enough for taking the time in helping me out with this!!! My kids have started asking me whether I have managed to balance my "sheets" biggrin

so I'm pretty sure they are getting fed-up with my confusion!

Stardoe · Guru

Yes you'd think the depreciation figure would be £18389, but if you put that in your P & L it doesn't work. What you have to put in is the total of the adjustments plus £1009.92, which makes £13729.00

Details                                                       Dr                     Cr
Depreciation Prov   P & M                                                   6,515.00
                               F & F                                                    1,597.00
                               MV                                                       4,607.08
Depreciation                                          12,719.08

12719.08 + 1009.92 = 13729.00

Would you like me to post the ETB I've done?

Also the Distribution and Carriage isn't an expense, you have to add it to the sales figure. I suppose it is a negative expense in a way, but I would add it to sales.

Yes your ETB entries are correct with regard to the motor expenses, just the journal is the wrong way round.

Sometimes you spend so long trying to work on something that you can't see the wood for the trees. Sometimes it's better to step back and leave it alone for a while, come back to it later

If you wish I will post my answer....you can still work it out yourself from it. Can't have you trying to balance your "sheets" all night...lol

Pauline

Catty · Member

You know what Pauline, that would be great thank you. I will use yours as a guideline. I just LOVE that feeling when you have batteled with a calculation/problem and then sort it out!!! So I feel rather dispondant at the moment. However as you said, I've spent so much time on this, that my head's swimming with all kinds of notations/calculations/subtractions that I'm afriad I might start waking up with my first words in the morning being bookkeeping references!!! wink

I think I'll def take another look at the depreciation side of things....that has totally thrown me.

Thanks again for all the time you spent on this - you are a star!

Stardoe · Guru

No problem Allison.....I think we'd better sleep on it and I'll post the answer for you in the morning!

However, just because I've got it to balance doesn't mean to say that everything is correct! But we can but try.

Night for now !

Pauline

Stardoe · Guru

Morning Allison.....I have attached the ETB and the BS & P&L for you. You can try and do it yourself from the ETB before looking at the BS & P&L if you like

Just one word of warning though, just because this balances doesn't mean to say it is correct! So don't take this as gospel

Have fun!

Pauline

Catty · Member

Thank you Pauline!
Since the kids are back at school I'll probably spend today - uninterrupted - pouring myself into it!!! biggrin

Thanks again for your rime on this!

Allison

Stardoe · Guru

No problem....I've enjoyed it

Let me know how you get on.

Pauline

Catty · Member

Pualine, after checking out your TB I realised what you meant. and I didnt even have to check your P&L and BS to get it to balance!! I am so excited I could dance!!!
Thank you so much for the help. The depreciation on the MV really through me off course and of course the Distribution and Carriages was a little bit of a tricky one.
One again YOU R A STAR!

Thanks so much!

Allison

Stardoe · Guru

Glad I could help

It's really satisfying when it all balances isn't it !

Are you going any further in your studies....Level III?

Pauline

Catty · Member

Pauline, I dont think you understand - at this precise moment you are my HERO haha wink

I'm going to finish doing my ICB, and then I'll start a degree in Business Finance.
Yesterday (and over the weekend) I doubted I should!! But since you helped me see the light I'm sure I now have a better understanding and can indeed go forward aww

I see you mentioned that you work for yourself. How long have you been doing bookkeeping?

Stardoe · Guru

Hero...well, I wouldn't go that far...lol

A degree in Business Finance, wow, you are ambitious

Good for you and good luck with it!

I have been doing bookkeeping for about 25years on and off. Did accounts when I was at college, but didn't really take it up fully until my hubbie had his own business. Only been fully self-employed since June 2008 though. After working for various employers I find self-employment much more enjoyable and fulfilling! I was into computers and IT for a long while (well still am) and worked in IT support for 3 years before being made redundant and then went back to bookkeeping. Never had any proper qualifications until now though.

Catty · Member

Well you sure seem to have had to experience with books!

If I have any future problems/question I would def love you to help out again.
Sounds like you really enjoy what you are doing.

I use to work in Investment Banking (no formal education though) and basically became a full timme mum after my kids were born. I enjoy working with figures - but especailly in the enviroment I use to work in. We will be taking over the family business soon and by doing bookkeeping it will only add advantage of the knowledge of the business. The degree, well, ambitious yes, but it will most certainly be great I'm sure!

Have yourself a very good evening and week and I really do appreciate all the help you have given me, including the time you have spent on this

Allison