Hi Corrinna,

The valuations from the client are not good enough.

What capital allowances were put through last year in the self assessment as that will give you some indication of what the fixed asset values should have been at that stage (the car will not have been AIA'd (but the plant may have been) and unless a very low emmissions vehicle should will not have been FYA'd).

Ask to see the original purchase invoices for all assets which will give you the date of purchase. You should be able to work out depreciation from that (which will also tell you how much more in capital allowances are still to be processed).

Do you have the self assessment from the year before that one as that will also give you some additional evidence in relation to capital allowances.

Are you sure that the client has attempted to contact the previous bookkeeper? Sometimes clients try to hide things from the new bookkeeper and pretending that the previous incombant cannot be contacted serves in their favour.

Have you sent an ettiquette letter to the previous bookkeeper requesting the information required?

Have you subsequently phoned them?

Which professional body are they with as if they are with a real one then at a minimum you should be given a copy of the last set of acccounts and the trial balance upon which that was based. If they do not then you can put a complaint about their behaviour into their professional body who at a minimum will have words with their member.

Your worst enemy here though is time in that we are already almost into January and getting things resolved via professional bodies is not the fastest thing in the world (although the threat of such may prove to be).

As a small observation, Accountancy £150! Have you told the client that their bill will be considerably more this year as if they expect a reconstruction to come in at a similar price is it really worth your time and effort getting involved in this?

kindest regards and happy new year,

Shaun.

Ah, van rather than car, sorry, my mistake there.

It seems strange that not everything was claimed as AIA and no subsequent capital allowances have been claimed.

It may be worth rechecking the invoice for the drill. I could posdibly see the batteries being expensed and drill capitalised although I suspect that it was all purchased as one so should have been capitalised as one... That said, £175 for two batteries is too much so that might be a non starter.

Is the client VAT registered? £3500 excluding VAT is £2916.67 which would put it under the AIA claimed which would make more sense. The difference of 444.33 would account for some of the tools... Again, is VAT registered that brings £1585 down to £1320.83 minus £444.33 is £876.50 still averages nearly £300 for each of the remaining tools which seems a bit too much to expense.

I wonder here whether the previous bookkeeper actually saw all of the invoices? (were they all purchased through the business or privately!) You may have invoices there for items that never went through the books at all.

The worry from the figures in your first post is that the incumbant put the equipment through as cost of goods rather than equipment expensed so without in depth analysis of the cost of sales you may never know the reality there.

There seems to me two options here.

1) A full three year reconstruction from the clients documentation asssuming that such is available in its entirety and the client realises that getting it perfect will cost.

2) Inform the client that this is a clean sheet approach.

Assuming the latter option

Take the amount of capital allowances claimed as the amounts invested in fixed assets and assume that equipment expensed went straight to cost of sales.

Calculate deprecition from the capitalised amounts evidenced from capital allowances and supported by documentation.

No brought forwards accruals or prepayments can be assumed.

If anything wasn't subject to capital allowances then it is not now recognised as an asset of the business (it is likely to have been (mistakenly) included in the cost of sales (but may not have been, if not the money invested by the business owner in the non capitalised assets that were not expensed is lost (unless you go back to option (1) which will be expensive for the client)).

Hope that helps get the ball rolling,

kindest regards,

Shaun.

p.s. The above latter, prudent approach that assumes everything not capitalised has already been expensed err's in the favour of caution / HMRC, not in the client's favour which is the way things should always be for missing or incomplete information (better assets are not relieved through the tax system at all thwan they are relieved twice!).

Not quite Corrinna.

You still want the opening balances for comparative purposes in the financial statements.

For the balance sheet all that you have is the opening bank which at least you have bank statements for.

For fixed assets (which you recreate from the capital allowances) as discussed you can recast depreciation from scratch.

I assume that you have all self assessments. If so, you have the profit or loss recorded each year so for each add your recalculated depreciation for that year back to the profit / loss for that year to give your profit figure building that up to a profit or loss in the capital section of the balance sheet.

So, from what you have you have recreated the non current assets, fixed asset register including depreciation schedule and the running profit/ loss held in the capital account.

To balance the balance sheet you have the value of any stock held if any (record what it is and the valuation attributed to it. This has to be a legitimate verifiable value that the stock held could achieve between knowledgable willing participants in an arms length transaction) and you also have owner capital introduced and drawings.

Correct on the capital allowances. Without recasting everything from scratch then assume everything that should have been claimed has been claimed

That the client is not VAT registered really makes me wonder where the old bookkeeper got their capital allowances amounts from?

Was there perhaps a personal element taken into account with the van? Ask the client whether they had that conversation with the outgoing bookkeeper to try and ascertain any percentage of personal use that was used in the calculation.

Hope that makes sense. I know that its not perfect as the client is likely to lose out on their own money invested in the business. But, at least this gives you a start point.

If the client has invested a lot of their own money in the business (and there are not too many transactions per year) then it may actually be cost effective for them to pay your higher rate to redo the full three years accounts to ensure that they get their money back (as a very quick and dirty calculation, it will become more cost effective for them if your fee's are less than 20% of their investment (that quote very much requires the accompanyment of one of those plumbers whistles that they always give before quoting!)).

I suspect that you will be running with option (2).

kindest regards,

Shaun.

p.s. just as a quick aside, I would use Excel for this before putting it into your accounts software