Bank Receipt

[The Secretary]

Hi

Due to too many temps making too many errors and messing up the COA, I decided to start a new set of accounts at the beginning of our financial year 01/10/2014. Today I have received a Bank Receipt, normally what I would do credit the nominal codes it was originally debited from. But this Bank Receipt relates to Debits in made the previous final year.

I don't know what to do with it - help!

Thank you

[brucedenney]

Well it depends. . . .

If it is a bank receipt and it was not included in last year accounts then, you could just include it in this years accounts on the first day of the year, providing it is not a significant amount.

If it is a significant amount then you need to let your accountant know and ensure they make a provision for it in last years account, you would agree a nominal code in the balance sheet for the provision and you would post the receipt against that account and then when the accountant gives you an adjusting journal which would include that provision and which would zero out the entry.

If it is not a bank receipts but a customer receipt then that is another issue altogether.

[The Secretary]

Well it depends. . . .

If it is a bank receipt and it was not included in last year accounts then, you could just include it in this years accounts on the first day of the year, providing it is not a significant amount.

Our financial year runs from 01/10/2014-31/09/2015 so I received the bank receipt on 05/05/2015 would I just post it today with 01/10/2014 date ? it is £25K

If it is a significant amount then you need to let your accountant know and ensure they make a provision for it in last years account, you would agree a nominal code in the balance sheet for the provision and you would post the receipt against that account and then when the accountant gives you an adjusting journal which would include that provision and which would zero out the entry.

Were not a business -were a private individual so do not submit to an accountant although we keep accounts and run year end etc

If it is not a bank receipts but a customer receipt then that is another issue altogether.

No its not a customer receipt

[brucedenney]

You said it was related to last year.

You say it was received on 5/5/2015.

These two statements are contradictory.

Can you clarify exactly what the transaction is.

[The Secretary]

Hi Bruce

Thanks for your reply

It is a bank receipt credited to the bank account on 05/05/2015 for purchases made in the pervious financial year


Please note we are not a business we are a private office

I need to know how to post it, which nominal code

Thanks

[brucedenney]

It may relate to transactions in the previous year, but it is a transaction in the current year.

It depend more on why.

If it is a discount, if it is compensation for faulty goods, if it is commission, if it is something else then it could be handled differently.

I don't think it is relevant but I don't understand what a "Private Office" is, there is no such legal entity to my knowledge.

[The Secretary]

Hi Bruce

A "Private Office" means that I work for a HNWI (High Net Worth Individual) running their household- they are not a business

The bank receipt is payment for purchased made in the previous financial year from OFFICE A for goods purchased, we are being reimbursed for the cost of these goods by our other, OFFICE B (private again), we have received a Bank receipt

Thank you for your patience but it is difficult for me to explain

Perhaps capital introduced ? would be a good nominal code ?

many thanks

[brucedenney]

Okay... I am starting to understand.

The way I see this is that last year you showed an expenditure in the form of this purchase, this was not actually and expenditure because the goods/services were not for this entity, they were for another entity and that other entity has now reimbursed you for the expense.

As such last years reporting was flawed.

The question is how do you want to rectify that in this year?

There are ways that spring to mind.

You could enter the receipt against the same nominal code as you originally entered the purchase, this is probably the most straightforward.

a/
Last year you showed and excess £25,000 expenditure on "Area A" this year you will show a £25,000 under expenditure on "Area A"

b/
Last year you purchased something on behalf of "Entity B", you failed to show that in your accounts properly, so make an "inter-entity" account in the Balance Sheet 11xx or 21xx (depending if they generally owe you or you owe them) and move the £25,000 onto that account backdated to last year, if last year is still open you could post it against the account it was incurred against, if last year is closed then do it against retained p&l and you make a note to last years accounts. This year when the money owed by "Entity B" is repaid you post it against that inter-entity account, the balance on the inter-entity account goes back to zero.

c/
Last year you bought an asset for £25,000 this year that asset got transferred to entity B and they paid £25,000 for it.
The original purchase would have gone against an asset account 00xx so this is a sale of asset and the receipt can go against the asset account.

[The Secretary]

Hi Bruce

Many thanks for your help

You could enter the receipt against the same nominal code as you originally entered the purchase, this is probably the most straightforward. -

This is exactly what I would do but remember due to too many temps altering the COA, I closed off the 2013-2014 accounts and started a "New Set of Accounts", by setting up a new Company for our new financial year 01/10/2014 -30/09/2015. The receipt of £25K was received on 05/05/2015 and relates to purchases made in financial year 2013-2014, these said purchase are overheads about 100 different purchases which make up the total of £25K.

Sorry if I'm not making sense x

[brucedenney]

Go do it, sounds right to me and you can answer the question if any one asks.

[The Secretary]

Hi Bruce

last question - but won't that give a false expenditure for this years accounts as I will be crediting each nominal code for purchases made last year ?

Many thanks

[brucedenney]

It will create "false" NEGATIVE expenditure this year, with will counteract the "false" expenditure reported last year.

[The Secretary]

Hi Bruce

If I post the 25K in this instance against each nominal code it will throw my budgeting figures out for this financial year, I have decide to post the 25K as one transaction against 1104 inter company debtor, with a note explaining.
Hope I am doing the right thing?

Many thanks

[brucedenney]

I would not do it against intercompany because it is not income received on behalf of another company, it is a negative expenditure in this company. I would put it against an account you have no budget for the suspense account for example.

[The Secretary]

Hi Bruce

ok noted. I have posted the 25K to the suspense account. At a later date will I need to move it from the suspense account ? when I do year end ?

many many thanks for your patience, it's very much appreciated