Accruals

Ratty

At the end of the financial year, the accountant asked for journals to be passed to show accruals at the year end. The journals were reversed at the beginning of the new year. However, the figures used originally were just an estimate and now the real purchase invoices have been received. My question is this - because the nominal codes started out with a credit balance, and the new invoices have been debited to the nominal codes, the balance on the nominal account is not correct due to the difference in the actual invoice and the original estimate. If anyone is still following this (!) how do I correct this difference?

wildgoose1uk

Were the journals posted at year end reversing journals? ie assuming a year end of 31 March were the journals posted on 31 March and reversed on 1 April? If they were not I suggest you reverse the journals now and post the invoices.... Assuming prior year is closed you will have to post them into current year but as long as the difference is not material there should be no issues.

Ratty

The journals were posted on the 31st March and reversed on the 1st April. The difference between what was anticipated and what was actually received amounts to approx £2k

coojee

It's fine, leave it. All it means is that last years profit was overstated by £2000 but only because of an estimate, not because you've done anything wrong. It's normal practice for accruals and the actual amount not to tie up. Accruals and prepayments are, after all, just estimates.

Monsoon

coojee wrote: »

It's fine, leave it. All it means is that last years profit was overstated by £2000 but only because of an estimate, not because you've done anything wrong. It's normal practice for accruals and the actual amount not to tie up. Accruals and prepayments are, after all, just estimates.

Agree with this. If the initial journal was posted correctly and reversed correctly, you don't need to do anything else.