Cash received in advance

columbia

Hi

Hope I don't come about as a bit thick, but this is actually the first time I have come across this situation.

Our company year end is 31st March, we have received a Grant which relates to the 11/12 year, but the amount was paid into our bank account on the last day of March, so that it shows in the 10/11 year accounts.

I know that with expenditure, it can be adjusted as a prepayment or accrual so that it can be matched to the correct month or even year in the accounts.

But how exactly should I show an adjustment for cash which has been received on the last day of our financial year, but actually relates to the next years accounts?

I have searched the internet and found a few solutions, but thought I would ask on here as I am sure many others must have come across this.

Thanks

Tracy

jilt

Tracy would you not just include it in the accounts as a creditor, in other creditors?

AK002

Yip, deferred income?

columbia

Hi Jilt

It is not money that we owe, it is money that we have received from a local council as a grant. Normally I would enter it as income, but as it doesn't relate to the 10/11 years accounts I want to do a posting to show that we have the money but it relates to the 11/12 year, as it is during this year that I will have the exenditure to offset against it.

(does that make sense??)

So, it is deferred income I believe. And I am not sure how exactly to deal with it.

Thanks

coojee

columbia wrote: »

Hi Jilt

It is not money that we owe, it is money that we have received from a local council as a grant. Normally I would enter it as income, but as it doesn't relate to the 10/11 years accounts I want to do a posting to show that we have the money but it relates to the 11/12 year, as it is during this year that I will have the exenditure to offset against it.

(does that make sense??)

So, it is deferred income I believe. And I am not sure how exactly to deal with it.

Thanks

You just show it as a credit on the balance sheet under deferred income.

columbia

Is it really that simple??!!

Currently it has been entered as income, so I assume I reverse my original posting and repost to deferred income, then after running the year end I just reverse back out to income?

Thanks a lot.

Tracy

jilt

coojee wrote: »

You just show it as a credit on the balance sheet under deferred income.

Yeah that's what I meant Tracy, sorry just couldn't think of the term 'deferred income' and I would have included it in other creditors with a note to say it was deferred income.

Am having a vat crisis at the moment so my brain aint working!

columbia

Thanks Jilt

I know what you mean about brain not working!!!

All the best with your Vat, and thanks to yourself, AK and Coojee for your assistance.

Steve Collings

Hi,

Sorry, I've just come across this - one question I have is whether this grant relates to capital expenditure or not?

If it does then it will still be credited as deferred income, and released to P&L over the life of the asset(s) to which it relates. Some accountants offset the cost of the grant against the cost of the asset, which is (slightly) permissible under SSAP 4 but the Companies Act actually prohibits Ltd companies from doing this, so be careful if your grant relates to capital. If revenue, the treatment will be as other posters have suggested.

Best wishes
Steve

columbia

Hi Steve

Thanks for the advice. It does actually relate to revenue not capital, but your reply is helpful should it be capital related another time.

Thanks a lot.

Tracy

Steve Collings

I see Columbia. No problem.

Best wishes
Steve