Balance Sheet


D

desperado98

Okay, the end is getting closer.

Thanks to the help I've completed the Trading and Profit and Loss AND
the statutory Profit and Loss (I know the Trading Profit and Loss is
not part of the statutory accounts hence why I make the distinction
and you know what I'm talking about).

After completing the Profit and Loss I have made a loss. After adding
the 'Retained profit BROUGHT forward' from last year I have a profit
figure.

Again looking at previous years account, the 'Retained profit carried
forward' figure is the figure that, when added to the 'Called up share
capital' in the Balance Sheet should come to the same figure as the
Total Assets Less Current Liabilities figure in Balance Sheet?

To give you an idea of what I'm talking about, my figures are:

P & L
Operating Profit: (2254)
Profit Before Taxation: (2161)
Retained profit brought forward: 8413
Retained profit carried forward: 3277

Balance Sheet
Tangible Assets: 2762
Net Current Assets: (8125) (this figure is due to a large creditors
amount)
Total Assets Less Curr. Liabilities: (5363)

My questions are:

1. I have a lot of negative figures, should any of them just be 0
instead (ie. some negative figures might not be possible so a 0 is
used instead)?

2. Should the Shareholders funds = Called Up Share Capital (2 in this
case) + Retained Profit C/F from P & L (if so I'm sort of stuck)?

3. A slight deviation, however under Debtors in the Notes I have Trade
Debtors and Other Debtors - the figure for the previous year has a
large Other Debtors figure and I can't see any reason for this - can
somebody give me the obvious 'Other Debtors' (if there are any) to
look for?

Again thank you in advance for any help.
 
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P

PeterSaxton

Okay, the end is getting closer.

Thanks to the help I've completed the Trading and Profit and Loss AND
the statutory Profit and Loss (I know the Trading Profit and Loss is
not part of the statutory accounts hence why I make the distinction
and you know what I'm talking about).
The profit and loss a/c is part of the statutory accounts. You need to
prepare full statutory accounts and then from them prepare the
abbreviated accounts for Companies House.
After completing the Profit and Loss I have made a loss. After adding
the 'Retained profit BROUGHT forward' from last year I have a profit
figure.
The profit figure is not arrived at after adding the retained profit
brought forward. When you say "profit" I think you are meaning
"retained profit carried forward".
Again looking at previous years account, the 'Retained profit carried
forward' figure is the figure that, when added to the 'Called up share
capital' in the Balance Sheet should come to the same figure as the
Total Assets Less Current Liabilities figure in Balance Sheet?
It depends whther there are any long term liabilities.
To give you an idea of what I'm talking about, my figures are:

P & L
Operating Profit: (2254)
Profit Before Taxation: (2161)
Where's taxation?
Retained profit brought forward: 8413
Retained profit carried forward: 3277
How do you arrive at the carried forward figure?
Balance Sheet
Tangible Assets: 2762
Net Current Assets: (8125) (this figure is due to a large creditors
amount)
Total Assets Less Curr. Liabilities: (5363)

My questions are:

1. I have a lot of negative figures, should any of them just be 0
instead (ie. some negative figures might not be possible so a 0 is
used instead)?
Negative figures can be possible. You should consider whether it is
easier to understand if you say Loss (for example) rather than show a
negative profit. You also have to take into account the comparatives.
2. Should the Shareholders funds = Called Up Share Capital (2 in this
case) + Retained Profit C/F from P & L (if so I'm sort of stuck)?
It really does depend on what the other balances are (eg Share Premium
A/c) but in most situations that is the case.
3. A slight deviation, however under Debtors in the Notes I have Trade
Debtors and Other Debtors - the figure for the previous year has a
large Other Debtors figure and I can't see any reason for this - can
somebody give me the obvious 'Other Debtors' (if there are any) to
look for?
Directors loan accounts
VAT receivable
Prepayments
Interest receivable
Loans
Again thank you in advance for any help.
You appear to be doing this the wrong way. I get the impression that
you are trying to work out every figure in isolation rather than use
double entry principles. It's very hard for an experienced accountant
to do that properly given the multitude of possibilities.

If you are using a software package you need to ensure that the trial
balance at the start of the period agrees with the previous years
statutory accounts.You then need to ensure you have prepared a bank
reconciliation at the year end accounting date. Ignore anybody who
says you don't need to reconcile your bank account to your bank
statement. If you spot any errors due to the reconciliation you need
to correct them.

Ensure you have done all the journals such as prepayments, accruals,
WIP, depreciation, wages and corporation tax.

If you are using an accounts package I would recommend you work from
the closing trial balance and classify each balance to one of the
categories in your profit & loss account and balance sheet.

If you are not using an accounts package (I think you said you were
this year) you should use an extended trial balance starting with the
previous years balance sheet, moving on to bank accounts and journals,
then to a trial balance and then P & L a/c & balance sheet. If you
analyse you bank accounts and produce a list of journals with
descriptions as well as a summary list of journals you can use a
spreadsheet to link everything together so that any change flows
through to your draft accounts.

Before I used to use accounts production software I would prepare
accounts using a combination of Word and Excel.
 
D

desperado98

The profit and loss a/c is part of the statutory accounts. You need to
prepare full statutory accounts and then from them prepare the
abbreviated accounts for Companies House.
It was the TRADING Profit and Loss I was meaning - the only reason I
thought these were not part of the Statutory accounts is that it says
so at the bottom of the page 'These do not form part of the statutory
accounts'.
The profit figure is not arrived at after adding the retained profit
brought forward. When you say "profit" I think you are meaning
"retained profit carried forward".
I'll rephrase:

After completing the Profit and Loss I have made a negative PROFIT ON
ORDINARY ACTIVITIES BEFORE TAXATION (emphasis is due to it be copied
from the document and not shouting). After adding
the 'Retained profit BROUGHT forward' from last year I have a positive
Retained profit CARRIED forward.

So yes, you were right.
It depends whther there are any long term liabilities.
I'd love to say there are not, but I can't say for certain. It doesn't
appear there are as none are mentioned in previous years accounts.
Where's taxation?
'Tax on ordinary activities' (for previous years) was simply the
Corporation Tax figure. As I have a negative 'Profit before taxation'
and after going through the calculation (less depreciation of 311 and
add bank account interest of 93 I don't have a positive figure in
which to calculate Corporation Tax from - at least that's what I
assumed).
How do you arrive at the carried forward figure?
The carried forward figure I calculated as:

Profit for the financial year after taxation: (2161)
MINUS Dividends: 2975 (these were Directors Dividends)
GIVES (5136)
Add the Retained Profit Brought Forward: 8413
GIVES: 3277

This was gleaned again from previous years (again emphasis made for
clarity, not for shouting).
Negative figures can be possible. You should consider whether it is
easier to understand if you say Loss (for example) rather than show a
negative profit. You also have to take into account the comparatives.
What is the difference between 'negative profit' and a 'loss'. I
assumed they were two phrases meaning the same thing. That's clearly
not the case from what you have been saying so I'm a little unsure
now.
It really does depend on what the other balances are (eg Share Premium
A/c) but in most situations that is the case.
Never saw mention of a Share Premium A/C in previous years.
Directors loan accounts
VAT receivable
Prepayments
Interest receivable
Loans

You appear to be doing this the wrong way. I get the impression that
you are trying to work out every figure in isolation rather than use
double entry principles. It's very hard for an experienced accountant
to do that properly given the multitude of possibilities.
Because I don't understand, at this point, the relationship between
the figures (and my Frank Woods book hasn't arrived AND I have a tight
deadline) you are absolutely right.
If you are using a software package you need to ensure that the trial
balance at the start of the period agrees with the previous years
statutory accounts.You then need to ensure you have prepared a bank
reconciliation at the year end accounting date. Ignore anybody who
says you don't need to reconcile your bank account to your bank
statement. If you spot any errors due to the reconciliation you need
to correct them.
I haven't actually done this yet, but to give you an idea of what I've
been noticing throughout my accounts I'll say a bit more. If I just
take 2004-2005 (which is when my last proper accounts were produced by
a bona fide accountant) I have been trying to understand where the
figures come from using the spreadsheet that I gave my accountant (the
accountant issued me with a spreadsheet to complete in their format).
Unfortunately the figures don't actually bear much resemblance to what
ended up in my accounts. The only figures I can see that can be
directly linked are the Cost Of Sales and Mileage (Motor Expenses).
The rest don't. If they were the same I could see the relationship.
What I really need is a sample set of accounts to go through that
would show me the relationship and hopefully the Frank Woods book will
do that.
Ensure you have done all the journals such as prepayments, accruals,
WIP, depreciation, wages and corporation tax.
I didn't have any prepayments, accruals or WIP listed.
If you are using an accounts package I would recommend you work from
the closing trial balance and classify each balance to one of the
categories in your profit & loss account and balance sheet.
When you say Profit and Loss account, to me it sounds like you are
saying Trading and Profit and Loss Account. There maybe no difference
in your mind to this as you work with them every day, however the
difference to me is the Trading and Profit and Loss Account in my
accounts (again going from previous years) has all of the Operating
Expenses 'categories' listed in there. Is this correct?

Part of the problem with using the accounting software is some of it
has been classified wrong (my fault) so that for example Computer
Hardware is classed as an expense when I think it should simply be put
under Assets; Directors Dividends is also classed as an expense which
I don't believe is correct.
If you are not using an accounts package (I think you said you were
this year) you should use an extended trial balance starting with the
previous years balance sheet, moving on to bank accounts and journals,
then to a trial balance and then P & L a/c & balance sheet. If you
analyse you bank accounts and produce a list of journals with
descriptions as well as a summary list of journals you can use a
spreadsheet to link everything together so that any change flows
through to your draft accounts.
Before I used to use accounts production software I would prepare
accounts using a combination of Word and Excel.
I'll sit down today and try and go through what you suggest.
 
P

PeterSaxton

It was the TRADING Profit and Loss I was meaning - the only reason I
thought these were not part of the Statutory accounts is that it says
so at the bottom of the page 'These do not form part of the statutory
accounts'.
I'll list the parts of the financial statement and say who needs what:

Directors report - shareholders, management, HMRC
Summary P & L - shareholders, management, HMRC
Balance sheet - shareholders, management, HMRC, Companies House
Detailed P & L - management, HMRC

There's various disclosures within the above but it's a start.
I'll rephrase:

After completing the Profit and Loss I have made a negative PROFIT ON
ORDINARY ACTIVITIES BEFORE TAXATION (emphasis is due to it be copied
from the document and not shouting). After adding
the 'Retained profit BROUGHT forward' from last year I have a positive
Retained profit CARRIED forward.

So yes, you were right.
What about taxation? Maybe there isn't any but I would have expected
comparatives and you still need to show you've taken tax into account.
I'd love to say there are not, but I can't say for certain. It doesn't
appear there are as none are mentioned in previous years accounts.
A lot of times there are not.
'Tax on ordinary activities' (for previous years) was simply the
Corporation Tax figure. As I have a negative 'Profit before taxation'
and after going through the calculation (less depreciation of 311 and
add bank account interest of 93 I don't have a positive figure in
which to calculate Corporation Tax from - at least that's what I
assumed).
You have to tax the bank interest.

What about capital allowances? Do you have the WDVs b/f?
The carried forward figure I calculated as:

Profit for the financial year after taxation: (2161)
MINUS Dividends: 2975 (these were Directors Dividends)
GIVES (5136)
Add the Retained Profit Brought Forward: 8413
GIVES: 3277
Great

This was gleaned again from previous years (again emphasis made for
clarity, not for shouting).


What is the difference between 'negative profit' and a 'loss'. I
assumed they were two phrases meaning the same thing. That's clearly
not the case from what you have been saying so I'm a little unsure
now.
It is the same but if you have profit one year and loss the other year
you would have to say Profit/(Loss).

Sometimes it is clearer to say Loss XXX rather than Profit (XXX)
dependent on the other amounts on the page.
Never saw mention of a Share Premium A/C in previous years.
It's not that common. I was just saying it for completenes..
Because I don't understand, at this point, the relationship between
the figures (and my Frank Woods book hasn't arrived AND I have a tight
deadline) you are absolutely right.
Amazon usually send books out really quick. Maybe there's been a rush
on them!
I haven't actually done this yet, but to give you an idea of what I've
been noticing throughout my accounts I'll say a bit more. If I just
take 2004-2005 (which is when my last proper accounts were produced by
a bona fide accountant) I have been trying to understand where the
figures come from using the spreadsheet that I gave my accountant (the
accountant issued me with a spreadsheet to complete in their format).
Unfortunately the figures don't actually bear much resemblance to what
ended up in my accounts. The only figures I can see that can be
directly linked are the Cost Of Sales and Mileage (Motor Expenses).
The rest don't. If they were the same I could see the relationship.
What I really need is a sample set of accounts to go through that
would show me the relationship and hopefully the Frank Woods book will
do that.
Without either know what adjustments the accountant made or what are
the detailed balances within the accounts you'll have great difficulty
getting it right. It looks like you have to make whatever assumptions
you can think of for the opening balances. Looking at the transactions
at the start of the next year may give you some clues about what
should be in the balance sheet.
I didn't have any prepayments, accruals or WIP listed.
If they are immaterial a lot of people don't bother.
When you say Profit and Loss account, to me it sounds like you are
saying Trading and Profit and Loss Account. There maybe no difference
in your mind to this as you work with them every day, however the
difference to me is the Trading and Profit and Loss Account in my
accounts (again going from previous years) has all of the Operating
Expenses 'categories' listed in there. Is this correct?
There is a Profit and Loss account balance on the balance sheet but
that is retained earning. Usually when people say Profit & Loss A/c
they mean whatever was in the old Trading & Profit & Loss A/c.
Obviously the difference is the Trading part but many companies don't
need a Trading section.
Part of the problem with using the accounting software is some of it
has been classified wrong (my fault) so that for example Computer
Hardware is classed as an expense when I think it should simply be put
under Assets; Directors Dividends is also classed as an expense which
I don't believe is correct.
You are correct on both counts.
I'll sit down today and try and go through what you suggest.
When you get Frank Wood it should be clearer. If you use a spreadsheet
you just want one column instead of two for Dr & Cr - make Dr positive
and Cr negative. I was really explaining that for next year because it
will take a lot of work to go through the examples in the book.
 
D

desperado98

I'll list the parts of the financial statement and say who needs what:

Directors report - shareholders, management, HMRC
Summary P & L - shareholders, management, HMRC
Balance sheet - shareholders, management, HMRC, Companies House
Detailed P & L - management, HMRC

There's various disclosures within the above but it's a start.
Thanks for that. Without going over what you've already told me, and
looking at previous years, I have Directors Report, Summary P & L
(which is just called P & L), Balance Sheet, and Trading and Profit
and Loss (which I assume is the same as you're detailed P & L). I also
have the Corporation Tax Computation (which amounts to zero).

This is all correct?
What about taxation? Maybe there isn't any but I would have expected
comparatives and you still need to show you've taken tax into account.
That bit you've thrown me with I'm afraid. I'm unsure what you mean by
comparitive. In the Notes I have a section for Taxation - Analysis of
the tax charge which has only one row under called Corporation Tax
(which is zero) and a total (which is also obviously 0).

Is this enough (again this was gleaned from previous years accounts).
A lot of times there are not.



You have to tax the bank interest.
At what rate and where would the tax go into (or is just added to the
bank interest and used that way)? Or would go under the Taxation
section in the notes and then also into the 'Tax on ordinary
activities' in P&L?
What about capital allowances? Do you have the WDVs b/f?
The WDV for the end of the last financial year (which is the same as
the net book value?) was 1891.The value for the end of this financial
year is 2762 (and it is listed under Tangible Assets in the Balance
Sheet).

From an earlier thread on capital allowances it appears that claiming
it would reduce the amount that Corporation Tax is charged on and it
doesn't have to be claimed. As my Corporation Tax was zero I didn't
see the point of reducing Corporation Tax as there wouldn't be any. Is
my understanding wrong?
At last something correct!
It is the same but if you have profit one year and loss the other year
you would have to say Profit/(Loss).

Sometimes it is clearer to say Loss XXX rather than Profit (XXX)
dependent on the other amounts on the page.
Is is therefore a symantical way of being clearer?
It's not that common. I was just saying it for completenes..
So in my case, the Shareholders Funds = 2 + Retained Profit C/F from P
& L? If this is the case (which from what you have said I'm certain it
is, I'm just clarifying) then I've no idea how to get there just now.
It could be as you say later than I need to make further assumptions
on what teh accountant did the previous financial year.
Amazon usually send books out really quick. Maybe there's been a rush
on them!
No. I've ordered other books with it and one of them is out of stock.
I usually expect Amazon to send the others anyway, but it appears they
have stopped doing that. They used to! I'm considering cancelling the
Frank Wood book from the order and simply reordering it again.
Without either know what adjustments the accountant made or what are
the detailed balances within the accounts you'll have great difficulty
getting it right. It looks like you have to make whatever assumptions
you can think of for the opening balances. Looking at the transactions
at the start of the next year may give you some clues about what
should be in the balance sheet.
This for me is the problem. I'm unsure of what assumptions I can
rightfully assume to make! One of my other issues is that I believed
that each financial year was taken in isolation from the last other
than the figures that have to be carried forward.
If they are immaterial a lot of people don't bother.



There is a Profit and Loss account balance on the balance sheet but
that is retained earning. Usually when people say Profit & Loss A/c
they mean whatever was in the old Trading & Profit & Loss A/c.
Obviously the difference is the Trading part but many companies don't
need a Trading section.


You are correct on both counts.
The first one was my error (assets) the second one is the software
error and I'm confused as to why, in the P & L it would list Directors
Dividends.
When you get Frank Wood it should be clearer. If you use a spreadsheet
you just want one column instead of two for Dr & Cr - make Dr positive
and Cr negative. I was really explaining that for next year because it
will take a lot of work to go through the examples in the book.
Ahh. Okay. I have until this time next year to produce my next set of
accounts and intend to start as soon as the book arrives going through
the examples so that this time next year I am not in the same position!
 
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P

PeterSaxton

Thanks for that. Without going over what you've already told me, and
looking at previous years, I have Directors Report, Summary P & L
(which is just called P & L), Balance Sheet, and Trading and Profit
and Loss (which I assume is the same as you're detailed P & L). I also
have the Corporation Tax Computation (which amounts to zero).

This is all correct?
It looks ok. I assume you have included Notes to the Accounts and a
Company Tax Return as well.
That bit you've thrown me with I'm afraid. I'm unsure what you mean by
comparitive. In the Notes I have a section for Taxation - Analysis of
the tax charge which has only one row under called Corporation Tax
(which is zero) and a total (which is also obviously 0).

Is this enough (again this was gleaned from previous years accounts).
By comparatives I mean the accounts figures for the previous year in
separate columns.
At what rate and where would the tax go into (or is just added to the
bank interest and used that way)? Or would go under the Taxation
section in the notes and then also into the 'Tax on ordinary
activities' in P&L?
The bank interest should be shown gross and any tax should be entered
in the P & L a/c. Bank interest receivable should be treated
separately especially if losses are involved. You may be able to carry
back your trading losses.
The WDV for the end of the last financial year (which is the same as
the net book value?) was 1891.The value for the end of this financial
year is 2762 (and it is listed under Tangible Assets in the Balance
Sheet).
It most likely isn't the same as the net book value in the accounts.
From an earlier thread on capital allowances it appears that claiming
it would reduce the amount that Corporation Tax is charged on and it
doesn't have to be claimed. As my Corporation Tax was zero I didn't
see the point of reducing Corporation Tax as there wouldn't be any. Is
my understanding wrong?
Capital allowances don't have to be claimed. You have to look at the
facts and make a judgement about the future before coming to a
decision on whether it is better to increase your loss or not.
At last something correct!








Is is therefore a symantical way of being clearer?
It's just a matter of taste mixed with common sense.
So in my case, the Shareholders Funds = 2 + Retained Profit C/F from P
& L? If this is the case (which from what you have said I'm certain it
is, I'm just clarifying) then I've no idea how to get there just now.
It could be as you say later than I need to make further assumptions
on what teh accountant did the previous financial year.
It is usually these figures.



No. I've ordered other books with it and one of them is out of stock.
I usually expect Amazon to send the others anyway, but it appears they
have stopped doing that. They used to! I'm considering cancelling the
Frank Wood book from the order and simply reordering it again.
Good idea.





This for me is the problem. I'm unsure of what assumptions I can
rightfully assume to make! One of my other issues is that I believed
that each financial year was taken in isolation from the last other
than the figures that have to be carried forward.
It does. You really need to get the balance sheet as correct as you
can and any differences should be put in the P & L.
 
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