Bank account opening balance entered from bank statement at 31/03/12 which includes the following £1000 deposit.
Last financial year on 24/03/12, banked £1000 as a customer deposit on an item, leaving an outstanding balance of £5000 to pay. The deposit has been accounted for in last years cash book and bank statement, but the balance and VAT is not accounted for until the invoice issued.
The following financial year, the balance of £5000 is paid on 03/04/12 and a sales invoice for £6000 is issued dated 03/04/12. It is at this time that the VAT is accounted for on the sale.
The problem is, we now have an invoice for £6000 and the VAT included thereon, but only £5000 received against it. How do I assign the £1000 that was received and banked last year?
In theory you should have a £1000 creditor on the balance sheet at 31/03/2012.
It will depend on how the deposit was posted, and the software being used but what I would be inclined to do is to reverse the postings in the current year along the lines of:
DR Creditors £1000 (Deposit a/c, Customer a/c, or what ever may have been used)
CR Bank £1000
Then either post the sales invoice to the customer account and receive the full payment into Bank (remember that £1000 will be a contra on the reconcilliation to clear the reversed receipt)
Or journal
Dr Bank £6000 (Maybe as £5000, and seperate £1000 noted as the contra to the reversal)
CR Sales £5000 CR VAT £1000
Hope that made sense. It did in my head when I was thinking it through.
There are probably other ways which will work too but it does all depend where the deposit CR was posted.
Sorry, I should have explained things a little better there was no accounts software used... Last year (and all previous years) everything was done manually by pen & paper and word processor. Extremely time consuming.
The "system" comprises of a cash book for current account transactions (entered as cheques issued and deposits made), Cash book for reserve account, Purchase invoice book, Petty cash book, Sales invoice book, bank statements folder, Till roll sales receipts, and copies of submitted VAT returns.
The only thing computerised is the payroll which runs Sage Payroll. The business has become too big and too complicated to continue in this time consuming method.
Bank reconciliation has never been done at all over the many years the system has been in use, and the bank statements are quite a few thousand pounds different to the cash book balance.
A set of accounts are produced once per year when all of the books, etc are sent to the accountants, which occurs approx 6 months after the year end. This will occur this year about October 2012.
So as you can see, there is no T/B or accounts available for the Y/E 31/03/12 because the accountants have not done the accounts yet. The only actual set of accounts available are from the year before last year (Year Ending 31 March 2011) but the figures in these are well out of date and do not seem at all easy to match-up to the various books and handwritten invoices etc.
With everything just changing over to computerised accounts, I want to get things right from the start.
With regard to the transaction mentioned previously, the £1000 deposit is from the bank statement and it was written in the cash book 24/03/12 as "deposit - awaiting £5000 balance". That's the only place it's mentioned... Until 3/04/12 when a sales invoice was written out as "£6000 less £1000 deposit, balance due £5000". The customer paid the £5K balance and it was banked the same day. The VAT will be accounted for in the 1st quarter of the new tax year...
That's if I ever get software up and running.. In addition to the above, I've still got to work out how to enter bank deposits from the paying-in book dated the last few days of March 2012, which aren't shown on the bank statement until after the new year starts in April. The same for cheques issued in the last week of March, which didn't hit the bank account until April.
All these various accounts software packages say they're easy, Pah! I don't think so, I can't even get the year started.
The accountants are Sage agents, they recommended going for Sage 50. They said it's the best available and will save a great deal of time and expense at year end, they also only use Sage software themselves. I had an online trial of Sage 50 and couldn't get it to do anything, I got tied up in knots. It maybe the best but it also seems far too complicated and very rigid in it's data entry procedures.
Just need a nice simple easy to use package, that I can actually get the year started with the above mentioned problems.
Btw, the accountant said it doesn't matter too much about what's entered for opening balances, he said the figures can be entered later on in the year (after he produces the accounts Nov/Dec) and everything should just adjust/correct itself. Is this true for all software or just Sage? Surely if the starting figures are not right then all the others will be wrong (until corrected when accounts produced)?
Sorry to waffle on but I'm totally confused by it all compared to the simplicity of pen and paper.
One more thing I forgot to mention. When items that contain no VAT are entered into our manual system, that's exactly how they are entered Zero in the VAT column. It doesn't matter what type of transaction or why there is no VAT, the entry is just Zero. Whether the supplier is not VAT registered or it's an EC import with no vat on the invoice or an outside EC import, or a VAT exempt item, or whatever, it just doesn't matter, it's always zero. Why complicate things.
Accounts software requires even the type of transaction to be specified so it can handle the zero vat differently. Especially Sage which is even worse because it requires remembering T codes, although to be fair when I asked the accountant he did say to ignore this and just choose an override code allowing us to type whatever amount we want in the VAT field. Saying that, I couldn't find anything to override the T codes.
-- Edited by Wonnov Menny on Tuesday 22nd of May 2012 01:17:16 PM
It should be even easier if you are keeping books manually. I'm not sure if there is a double entry in your system, but the original receipt should have been a 'payment on account' against the relevant customer account.......then this would be adjusted by the accountant to 'Deposits Held'. Then after reversing this adjustment in the current year and receiving the £5,000 balance payment, the account would be zero.
Again, I don't know what kind of manual system you have but Sage should be fairly intuitive and it sounds like even Sage Instant would be an improvement on what you have got. As for the bank entries that are pre-year end and don't appear on statement until April, the bank balance entered as the opening balance should be the reconciled balance including these items.....but you say that the bank has never been reconciled???? If you add up all the items (cheques written, payments banked) that haven't yet hit the bank statement, are you still thousand adrfit? Do this, add and subtract these figures from the bank statement balance at year end and this is your actual balance. Any difference will have to be adjusted by the accountant (the difference will sit in suspense account on Sage). I am suprised the accountant hasn't quoted to help with setting up Sage/offer training?? Maybe give them a call and let them know you are struggling.......because once it is done and you become a little more comfortable with Sage, life should be good!!
Thanks for the reply. I think I shall have another go.
The manual system I mentioned is just plain and simple lined books with columns drawn down the page as required.
A book for the bank account ins/outs.
A book for petty cash ins/out.
A book where the purchase invoices are written down in columns headed (Date|Supplier|Ref No.|Gross|Vat|Nett|Date Paid|Pay Method|Chq Number).
A book where sales are recorded with columns headed (Date|Customer name|Inv No.|Gross|Vat|Nett|Date Rcvd|Method).
There is no double entry system used at all. Everything is just entered in either the sales book or the purchase book, then based on the payment method (csh/chq) is entered in either petty cash book or bank account cash book.
No customer account records are used, just the sales book, with one entry/sale per line.
No bank reconciling has ever been done over the last 30 years. The bank statements are always adrift from the cash book. I just checked today, it's just over £5000 difference, I have known it to be tens of thousands adrift sometimes.
Basically, the £1000 deposit I mentioned previously was rcvd from the customer, written in the bank paying-in book and banked on 24/03/12, it was written in cashbook the same day as "deposit awaiting balance". No receipt or anything was given to the customer. The only places it shows up are the bank statement and the cash book. The cashbook is used for nothing other than information, it has no bearing on the VAT or anything. A VAT return was done on 31/03/12 but it didn't include this deposit because the sale hadn't taken place at that time.
Computers/software are making this complicated, doing it the old manual way is easy... When the balance paid on 3/04/12 write out a sales invoice as (amount £6000, less deposit -£1000, balance £5000) then just write on the date the deposit was rcvd on the invoice, bank the money and write it in the cashbook, Job Done! Nice and simple. No double entry needed. Why do computers have to complicate things so much?
One of the main problems I had with the Sage demo was all of the codes it requires just to enter anything and the way it blocks anything I tried to do. I tried to create a sales invoice, but it wouldn't let me until I create a customer account, why! the details are on the invoice, why duplicate stuff. I just want the sale and the amount, that's it. If it functioned as easy as the manual system that would be easy.
If I was a software developer I'd create book keeping software so that when I wanted to issue an invoice, an actual on-screen invoice appeared which let me type directly onto the invoice WYSIWYG style. The same with cheques and the bank paying-in book. Purchase invoices could be entered basically the same as sales invoices, just copy the details from teh invoice and it creates an on screen purchase invoice and provide the option of scanning a copy of the purchase invoice/receipt. All the underlying stuff could be hidden and take it's data from the information entered. Now that's easy accounts.
The accountants did ask about Sage training, but we already pay them many thousands ££ so don't want to pay them any more. According to the packaging on these software packages they supposed to be simple and easy (except Sage). The Quickbooks box says "Easy accounting for small business", "Guaranteed easy", "Get started Quickly", "easy to learn and use", etc.. I don't think so! Decided to leave quickbooks and have a go with VTT+ which someone told me was the nearest thing to a manual system but run on computer, if that makes sense.
I appreciate all the help and time people give in this forum.
Another related problem I've just come across whilst getting my figures together...
How would I account for this in accounts software:-
Insurance invoice dated 9-Nov-2011 for £28348.80 entered in purchase invoice book on 9-Nov-2011.
The bill is payable by way of 10 monthly instalments of £2834.88 each, from Nov 2011 to Aug 2012.
Due to the payment schedule only 5 instalments have been paid in the financial year ending 31-Mar-2012, leaving the remaining 5 to be paid in the new financial year ending 31-Mar-2013.
This being insurance, there is no VAT involved, but the full nett amount has already been accounted for on the 9-Nov-2011 and included in the VAT return figures submitted for quarter ending 31-Dec-2011.
In accounts software (such as VTT+ etc) am I correct in thinking I should enter it like this:-
First Reset the Y/E date to 31/03/12. Enter Supplier Name etc as normal, but when creating the supplier account, enter the opening balance as £14,174.40 being the amount which remains due (the other 5 instalments). Enter Purch Inv Date: 09/11/11 with the full amount of £28,348.80 as insurance / opening balance contra.
Question: When I reset the date back to Y/E 31/03/13 will the software know that only half remains due, because of the opening balance entered when creating the supplier account?
Firstly the invoice would have been entered as normal and the monthly payments reducing the suppliers balance in the purchase ledger. Whatever this balance is at the year end (the year end before setting up the computerised system) should be the amount entered into new supplier account as opening balance.....nothing else is necessary.....i.e., you don't then input the original invoice. If you have to put in details of actual invoices to make up the opening balance, I would say input the details but only input the amount outstanding at the year end. I am sure in most packages you will have a choise to enter either the O/B amount or input the details of invoice to make up this balance.
This will all mean that the opening balance is correct and you simply pay this down each time a monthly instalment is made.
Secondly, the accountant would adjust the insurance in the P&L as you would have recognised the whole years charge in this period when the invoice was input. If the insurance covers (say) August to August and your year end is March, then 4/12 of the total should be moved to 'Prepayments'........regardless of how much is paid because you would have entered it in total in the purchase ledger......although you can disregard all of part two as it might end up adding to the confusion!!
I can see that even if you have plenty experience in accounting, setting up accounts software and loading the TB etc etc might be quite daunting.
I remember having quite a large book from Sage taking you step by step through the installation and set-up process. There are correct ways to do this which will avoid problems further down the road....and obviously ways that might cause confusion and problems later on.
So, whatever software you have settled on, see if there is a user guide....you might be able to access one online.
Thank you very much for the reply, without the help and advice of the people here I'd be tearing my hair out by now.
It is a big problem with having no previous accounts software and no TB or anything to work from, plus not having a double entry system in use and having various invoices and bills crossing over the year end.
Software wise, in addition to VTT+, Solar Accounts and Quickbooks Pro, I've now just obtained Sage 50 Accounts 2012. I thought Sage would have come with some printed manuals or something in the box, but nope! Apparently it has some help guides which canbe printed out.
One of the biggest problems I have with Sage is all of the nominal codes required (I could do with a chart or something detailing them all) and having to setup new codes etc to match our own requirements.
Can you remember the name of this big Sage book you mentioned?
I think I need something which shows things in pictoral child like format, maybe something like Sage Accounts for Dummys if they do it
With Sage you can usually choose a certain set of accounts relevant to certain business types during the set up process. You can also print out a list of the Chart of Accounts and nominal codes included - Nominal Ledger - COA - Edit - Print.
The Dummies books are not everyone's cup of tea. (Well, they're not mine anyway..lol) The Sage Line 50 in Easy Steps is quite good and most of it will apply to Sage Instant as well.
Hi Pauline, quickbooks has a similar feature where the business type is selected when setting up. That's a problem in itself though. I can never find a category that properly fits the business due to it having many different facets.
Thanks for the book info, I'll have a look. Btw, when I said a dummy guide to sage, I was referring more to myself than the book!
As with a lot of things, the user guide is probably in electronic format only these days. I would suggest giveing Sage a call and asking them where you can find what you are looking for.....getting started guide/creating nominal structure etc.
Decided to leave quickbooks and have a go with VTT+ which someone told me was the nearest thing to a manual system but run on computer, if that makes sense. 
