A right old mess making me self-doubt

imeldabye
imeldabye Registered Posts: 147 Dedicated contributor 🦉
in General accounting discussion
Good evening all. I hope someone will turn a blind eye to what might seem to be severe inadequacy in experience and expererience but here goes.
I've been a MIP for a couple of years now, 99% of my clients are sole traders, partnerships or needing their books done.
I regularly get asked to do small company accounts work but I regularly turn it down as I don't feel confident enough to take it on. I am a worrier and a perfectionist (actually I think most of the people on this forum are) and I stress about not "getting it right".
Now to the nitty gritty- a friend of mine asked me to look at his accounts for him. He has a small limited company with the following OBs on this most recent Balance Sheet 2009-10
DLA Dr 4966

Corp tax payable Cr 4293
Accruals Cr 588
Bank cash Cr 84


Equity:
Share Capital 1
Share Premium 0
Retained Eearnings 10,239
Dividends -10239

So now for 2010-11L all I have now from my friend are his basic P&L figures
Sales: 37694
Expenses 19770
Net Profit 17924
And he has told me that he paid his CT of last year £4293

Now I come to produce his P&L and BS and I am sorry to say I am completely stumped.
Can anyone help
and
Can anyone suggest a text book which will run over what I know to be basic processes. No other information or number or data is available for this year's accounts.

Many, many thanks in advance.

Comments

  • deanshepherd
    deanshepherd Registered Posts: 1,809 Beyond epic contributor 🧙‍♂️
    I would start by getting his company bank statements for the year, although by the look of his overdrawn DLA and rather convenient zero balance on the profit and loss reserve it doesn't sound like he uses a business account.

    If I was in your position I wouldn't touch it.

    If you were more of a charlatan then reverse the accrual, add in your new accrual (I'm assuming this is probably accountancy fees), work out the corp tax and accrue for that, credit his DLA for last years tax which he presumably paid himself, credit the resulting profit to DLA and debit to drawings and see how that overdrawn loan account looks.
  • imeldabye
    imeldabye Registered Posts: 147 Dedicated contributor 🦉
    Dean thanks for posting back. - please read the CAPS
    If you were more of a charlatan then reverse the accrual, add in your new accrual NOT SURE WHAT YOU MEAN- THE ACCRUAL FOR £588 WAS IN THE PRIOR YEAR'S ACCOUNTS, AND YES IT WAS FOR ACCOUNTANCY, ADDING IN THE NEW ACCRUAL WOULD SURELY BE REPEATING THE JOURNAL? (I'm assuming this is probably accountancy fees), work out the corp tax and accrue for that YOU MEAN AFTER THE ACCRUAL?, credit his DLA for last years tax which he presumably paid himself, YES AND OK credit the resulting profit to DLA and debit to drawings HOW DRAWINGS WHEN HE IS A DIRECTOR- WHY NOT DIVS PAID OR DLA? and see how that overdrawn loan account looks. would start by getting his company bank statements for the year, although by the look of his overdrawn DLA and rather convenient zero balance on the profit and loss reserve it doesn't sound like he uses a business account.NO HE DOESN'T...

    If I was in your position I wouldn't touch it.IT'S ACTUALLY IMMATERIAL AS HE HAS FOUND SOMEONE TO DO IT. HOWEVER, IT WAS MORE THAT I WAS STUMPED AND ANXIOUS THAT I DIDN'T KNOW HOW TO COMPUTE THIS YEAR'S ACCOUNTS.

    THANKS DEAN
  • jamesm96
    jamesm96 Registered Posts: 523
    I don't want to crash across Dean's reply; I completely agree with his comments. Just on your query about the drawings, though, drawings are a DLA transactions. So, a drawing will reduce the balance on the DLA and capital introduced will increase the balance. When you use a dividend, it's often treated as capital introduced (i.e. debit dividends credit capital introduced on the DLA. Then when he takes the cash it's debit DLA and credit cash).
  • imeldabye
    imeldabye Registered Posts: 147 Dedicated contributor 🦉
    James thanks
    oh i always thought drawings was a term confined to sole traders- so that's sth else i've learn't! :)
    should i post out the accrual and then re-post?
  • Monsoon
    Monsoon Registered Posts: 4,071 Beyond epic contributor 🧙‍♂️
    imeldabye wrote: »
    oh i always thought drawings was a term confined to sole traders- so that's sth else i've learn't! :)

    No, you're right - director/shareholder do not have drawings. Not officially. Sometimes its easier for a client to think of it as drawings (despite telling them it's salary/divs/DLA) bvut they do not have drawings. They debit the DLA instead.

    To be fair, it's just semantics, but it's an important distinction.
  • deanshepherd
    deanshepherd Registered Posts: 1,809 Beyond epic contributor 🧙‍♂️
    Haha.. interesting how a debate ensues over a typo.

    I meant to say 'dividends' not drawings!
  • imeldabye
    imeldabye Registered Posts: 147 Dedicated contributor 🦉
    yes absolutely!
    Did you mean to reverse the accrual and then to re-post- or have I misunderstood?
    would you consider being my mentor Dean or is there a queue??!!
  • jamesm96
    jamesm96 Registered Posts: 523
    deanshepherd wrote: »
    Haha.. interesting how a debate ensues over a typo.

    I meant to say 'dividends' not drawings!

    Hahaha, that's made me chuckle!

    The software we use splits a DLA on an LTD co into lots of sub-accounts so that you can post a journal to a particular type of transaction, drawings and capital introduced are two of them so we've always just used the term. A DLA can be overdrawn, of course.
  • Dean
    Dean Registered Posts: 646 Epic contributor 🐘
    deanshepherd wrote: »
    Haha.. interesting how a debate ensues over a typo.

    I meant to say 'dividends' not drawings!

    No you didn't :P

    Tomato/tomatoe spring to mind?

    Regards

    Dean
  • Dean
    Dean Registered Posts: 646 Epic contributor 🐘
    imeldabye wrote: »
    yes absolutely!
    Did you mean to reverse the accrual and then to re-post- or have I misunderstood?
    would you consider being my mentor Dean or is there a queue??!!

    Reverse the previous year's accrual. This, presumably being the amount your friend was charged in the previous year for accountancy fees.

    Then as you are the 'new accountant' your fees may differ from that of the previous accountant so depending on the time engaged or your fixed fee or however you charge you would need to accure for that!

    Regards

    Dean
  • imeldabye
    imeldabye Registered Posts: 147 Dedicated contributor 🦉
    but Dean my client paid the £588 accrual!
  • Dean
    Dean Registered Posts: 646 Epic contributor 🐘
    imeldabye wrote: »
    but Dean my client paid the £588 accrual!

    Seriously this is starting to become painful!

    BS 2010:
    Cr: Accrual 588

    Client pays:
    Dr: Accountancy fees 588
    Cr: Director's loan 588

    Reverse previous year's accrual:
    Dr: Accrual 588
    Cr: Accountancy fees 588

    Provide new accrual:
    Dr: Accountancy fees £5m
    Cr: Accruals £5m

    Or you can do it the shortcut way:

    Client pays:
    Dr: Accruals 588
    Cr: Directors loan 588

    New provision:
    Dr: Accountancy fees £5m
    Cr: Accruals £5m

    Regards

    Dean
  • deanshepherd
    deanshepherd Registered Posts: 1,809 Beyond epic contributor 🧙‍♂️
    ^ good explanation. Nice fee too.
  • imeldabye
    imeldabye Registered Posts: 147 Dedicated contributor 🦉
    Thanks. Believe it or not I had resorted to drawing T accounts out and had finally figured it out whilst you were painstakingly typing out the DRs and CRs.
    Really appreciate your efforts.
    Looks like he's taken way too much out of the biz and now he has to find his CT for 2011...
    but hey NOT MY PROBLEM!

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