Currently going over the books for 11/12 eoy for a partnership. (Simple analysed cash book on excel is used) I'm gathering the accruals, pp's and creditors together for the accountants and have come across something that has thrown me.
With petty cash and sometimes larger purchases the owners pay for it themselves and don't end up reimbursing themselves till quite some time after. On this occasion there was around £1600 of varying goods from 3-4 months back, £1000+ being capex, all reimbursed in the next 12/13 tax year. (Obviously this is bad practice. It came about as one owner wasn't around often and forgot to arrange the reimbursement at the earliest.)
Now as the books don't go off to the accountant immediately I don't have to estimate accruals. So as I know of these aged expenses I'll bring them to the accountants attention as relating to the 11/12 period . What will he do with them? Can capex be accrued? Then what about depreciation, I take that it still has to be from purchase date as opposed to the date the books were finally hit?
The books are 'hit' from the date introduced (CR Partner 2 - DR Purch or Cap. Ex) to the partnership - A bank or cash reimbursement might never specifically happen.
The cap-ex was intended to be introduced on the date stated and is entered in the asset register and books at that point. The accountant will apply depreciation and capital allowances as necessary from then. The £1000 seems approximate so provide invoice references.
The goods are also introduced on the relevant dates and be valued along with other stock at the year end.
Hi Tim. Apologies for the delay but thanks for that. It makes sense.
I only work with a cash book here and so don't have the partner accounts. But I understand how this would work now in an accounts package. The accountant seems to have just worked from whatever was given him over the years and so although I've made improvements to the books he hasn't spoke to me about what else might be useful. I'm not aware of the dialogue that goes on between him and the owner but I would imagine he asks separately about assets introduced and so on, things that the books wouldn't reflect on their own.
Yep, Shaun, a good accountant will see the right questions then ask them. Say a vehicle was sold, then it should almost certainly follow that a new one was bought but if this was with private funds then the entries might not reach the books.
A standard letter is helpful at each year end asking for a list of debtors, creditors, assets bought and sold, cash in hand and various other tailor-made questions.
Thanks again. Just a thought on assets that were not sold but had either reached end of useful life or upgraded. I take it questions would be asked on that basis.
My basic understanding of this is that if an asset was repaired then it's revex, but if it was upgraded then it's capex. One of the items this year was a light fitting purchase which replaces the old one. I made a note of this fact on the cash book in excel. I suppose a bookkeeper is expected to check for this sort of thing anyhow. The previous bookkeeper here would have just entered it into fittings and I don't know whether the accountant had any further communication to clarify. I heard in previous years that accruals and pp's were done by the accountant and that debtors and creditor lists were requested, although I'm doing these now automatically.
Yes, I imagine the accountant would look at the individual entries grouped as 'fittings' and capitalize them as appropriate. The light, providing it was not an upgrade, would be a renewal and, as you say, Revenue expenditure.
He might train a bookkeeper just to plonk anything under £100 in REPAIRS, and anything over in FITTINGS, but that is just a rule of thumb and will very likely review every transaction before finalising the accounts. It'd be a good idea to have a chat with the accountant to see exactly where he expects your duties to end.
