I currently book keep and pass it onto the clients accountant to complete. However I have a question before I pester them. If a client has invoices dated within the tax year (Y/E 5th April 15) and doesn't pay them until the next tax year, how do I account for these as I understand they relate to 2014/15.
I currently have columns named Date, Supplier, Bank, Cash. The bank reconciles however should I add another column showing Invoices outstanding?
You are correct in that accounts are (in general) prepared on an accruals basis.
That is, monies are accounted for as they are earned or incurred, not as they are received or paid.
For the example given the money should have been received in this period so you recognise as a sale in the income statement but rather than taking the other side to the bank, you would recognise it as a creditor (an accrual).
How you handle that depends on the software. I use VT and it takes care of accruals and prepayment for me but other software may require that Creditors are moved to accruals before the period end and then reversed after the period end.
When payment is actually received the double entry for the bank is against the balance sheet creditor rather than touching the income statement as the actual recognition of the sale would have been within the correct period.
If, as sounds to be the case here, you are simply using an Excel spreadsheet you really need another column for creditors (Due now, paid later).
You should talk to your accountant anyway as he/she may have software that he would prefer for you to use rather than a spreadsheet which is not generally the ideal software for handling accriuals (creditors) and prepayments (debtors).
kindest regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
