Incorporation

Hollysan

I incorporated a sole trader client last year and am now working on the first year's accounts for the limited company. I have already sorted out a lot of the usual issues at incorporation, but I am having a head-scratching moment as to what to do about the PAYE and VAT creditors at cessation. Both were eventually paid out of the new limited co. bank account, and the VAT reg. no was transferred to the new company. I know both can be treated as liabilities of the continuing business but how to include in the books? Debit to Director's loan?

Similarly, trade debtors and creditors. I was not required to produce a balance sheet for the sole trader business and I don't have a lot of detail on these.

Many thanks for any suggestions...

Hollysan

deanshepherd

Debiting to directors loan should be fine. Either the director put the money into the company bank account with which to pay these liabilities in which case the DLA will be balanced out; or the money came in from existing trade debtors which, again, will balance out the DLA for you.

The only problem would be if the business was insolvent at incorporation which I think is probably unlikely.

As for opening debtors and creditors, you will just have to work these out from looking at what was paid/received in to the company bank account and referring back to the date on the related invoice/receipt. Not doing so could mean duplication of income and expenses.