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Shannon Oslo


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Trade debtors wrong on balance sheet
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The previous accountant significantly overstated trade debtors on the balance sheet, but calculated the profit and loss correctly

Is it OK to reflect the true trade debtors figure on the following year's balance sheet, or is such a discrepancy going to a trigger an investigation?
  • Year end 31/12/2010, Ltd Co invoiced £5,000 in December 2010 for work done in December 2010. This was not paid until Jan 2011.
  • Accountant used £5,000 for the p&l calculation but by mistake put £10,000 under trade debtors on the balance sheet on the 31/12/2010 accounts. 
  • £10,000 was just wrong so is it OK to put £5,000 on the 31/12/2011 accounts (under 31/12/2010 on the balance sheet) 

Thank you



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Dalbir


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Hi Shannon. if P&L is right and aged debtors is overstated; then which balance sheet account is understated? Dalbir

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Shannon Oslo


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Hi Dalbir. I don't think there is a balance sheet account that is understated. The previous year's trade debtors was wrong by a similar amount though.

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Wella


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Hi Shannon

I can see where Dalbir is coming from. Does the balance sheet actually balance? or is it just that there is a typo on the balance sheet.

If it balances then one of the other BS items must be out too.

Bill



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Shannon Oslo


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Sorry, yes I understand what you mean. The balance sheet does balance. And the p&l is correct for that year.

Unfortunately it is the previous year where the problem seems to lie, ie the trade debtor was wrong then and was just carried forward

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Shannon Oslo


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So it was in that previous year that the sales were overstated and the corporation tax was too much

Is the correct thing to do to resubmit amended accounts for that year? Or is it OK just to put the true figures (under 31/12/2010) for the 31/12/2011 year-end?

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Dalbir


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Hi Shannon

Have you collated together the evidence of prior year error? If it relates to year ending 31st Dec 2010, you can submit an amended corp tax return to HMRC. As far as I am aware, you have 12 months from filing date to submit amended return, so can still submit amended return for year ended 31st Dec 2010 by end of December 2012.


Regarding statutory accounts; If £5k is not material: Book a prior year adjustment, reducing retained earnings bfwd by £5,000 and restate the balance sheet as at 31st Jan 2010 (presuming yearend is 31st Dec 2011). Disclose impact of adjustment in notes.


If it is material or you are not sure if material, give Companies House a buzz; they may ask you to resubmit Amending accounts for year ending 31st Dec 2010.


Dalbir

ps: legal stuff; this is a forum for discussion and opinions, so no liability on me and my related parties for my posting.




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From £20 plus Vat per client per annum; No more excuses for small business owners and their accountants in managing their books on spreadsheets.
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