UK Basic Balance Sheet question

[bergin]

Oh hi there

Ok have been looking at the "balance sheet" videos and this is my understanding so far:

The accounting equation is assets = equity + liability

So lets say I have in the bank £5000 cash (i.e. from payment from work the ltd does) (current assets)
+ £1000 in IT equipment after the depreciation (fixed or non-current assets) = £6000

I have a salary liability of say £2000 and £3000 equity in retained earnings = £5000

Ignoring for the moment the £1 stake in the share capital, how do I balance this out?

How do I get the £1000 into the right hand side of the equation - i.e into the equity & liabilities? so as to balance it out?

 

[hirschcogmail.com]

Hi

It is easier if you look at the accounting equation as equity= assets - liability. your equation is right also.
assets £6000 liability £5000. There is a £1000 missing. You have to look carefully in the accounts where the figure is.

Without having a copy of the accounts I cannot do it.

Kind regards

 

[bergin]

thanks for that; I've since sorted it out using quickfile which generates a report. The only thing I dont know how to do yet is the depreciation of assets but Im sure I'll figure that out before my Nov filing!

 

[Lee Thomas]

thanks for that; I've since sorted it out using quickfile which generates a report. The only thing I dont know how to do yet is the depreciation of assets but Im sure I'll figure that out before my Nov filing!

Please bear in mind depreciation is applied to management accounts only (for internal use) therefore are disallowed for statutory accounts purposes. Instead capital allowances calculation on qualifying assets should be performed to replace depreciation. There are HMRC rules to follow.

 

[hirschcogmail.com]

Hi
I am glad it is sorted out.

Normally companies use a depreciation rate of 25% a year on a reducing balance basis. However for some assets you can reduce the rate ie for furniture for example. I do not think it depreciates by 25% each year so I use 10%. All this is added back when working out the taxable profit which is different from the trading profit.
HMRC have their own rates which are called capital allowances. Most of them are 18% except for company cars.

For most assets you can have 100% AIA in the first year up to a limit. At the moment the AIA limit is 1million till 1st January 2022.
AIA is the annual investment allowance. Normally we claim all of it if £1m assets have been purchased. As claiming all of it maximises relief.

If you have any other questions please do ask.

Chartered Global Management Accountant and a member of the AICPA