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Hi

I'm new the site and wondered if someone could help me please.

I am at year end 31st Dec, and I need to make a provision for a couple of items in Sage before sending to my accountants.

Is it just a matter of setting up a new Nominal Provision Code?

One is on the Debtors Ledger and the other is Wages Ledger.

In my mind I thought that I would set up a new NC Called Provision for … then I would DR the new NC but not sure what account to CR as I cannot touch the Debtor control account. Unless I actually CR a supplier account but then that obviously effects what we owe which would be incorrect also. Maybe other debtors?

OR is it as simple as doing an Accural for it?

Many thanks

Kindest regards

Red

Hi Red

You have avoided making a very common mistake that accountants like to do!

Journalling to the Debtors or Creditors control account is a "no no", it breaks the reconciliation of the controls to the ledgers.

What I would do is to set up an extra account next to Debtors or Creditors and call it "Debtors year end Adjustment" or something like that.

Hi!

Many thanks indeed. I too understand the importance of not touching a control account. Sage won't allow it directly anyway.

That makes a lot of sense thank you.

Out of interest though, why not an Accrual?

Thanks so much.

Red

Another thought that just came to me.

I already have a provision for bad debt, as standard. This is obviously on the Debtors ledgers, would it be acceptable to add in the same grouping next to Provision for bad debts, 'provision for …' and another one 'provision for …'?

My understanding is, and please correct my if I'm wrong, I'm not the smartest I'm afraid…

.. but my thinking is that the provision is an expense to the business, which needs to be provided for Year 2015 - 2016, and needs to be on the Profit and Loss reports to then be able to give an accurate Capital Amount - (Assets - Liabilities) for filing etc…


Hope I have that correct, it made sense ay the time.

I kinda do know, but then I loose my confidence.

Thanks so much again.

Red

As I understand it:-

Provisions and Accruals are almost the same thing. Provisions are only for expenses, but Accruals can be for either and functionally they do the same thing.

I expect that there is some finer detail that decides if something is one or the other, you really need to ask someone who understands the minutia of the details of the standards. I am not a Qualified Accountant and my opinion in this area is just my opinion.

I am not sure I understand your second post.

These transactions are in essence moving income or expenditure from one financial period into another. As that income/expenditure can not be in the P&L it is accounted for in the Balance Sheet.

So if a customer pays me now for something that I not yet done, I havn't really earned that income yet, indeed if I were to cease trading this instant that money is a liability that would need to be returned to the customer, so for accounting purposes I want to remove that income from this period and move it to the next.

If I have paid a large chunk of rent in advance and have more expenditure appearing in my P&L than actually relates to this period then that is not right so I want to move the appropriate part of it into the next period because part of it is really an expenditure in a future period (or periods).

With bad debts I may have a debt that I expect not to get paid for, but not yet given enough time to be sure, I might want to account for that debt in this period even though it will not happen till a later period (or conceivably never happen, I could get paid)

With a bill I pay in arrears, say my mobile, I have just been abroad and I have probably run up a £1000 bill doing some great business but the bill has not yet arrived, I want to create expenditure in this period that will actually be incurred in the next period.

My general (unqualified) view on this is that the semantics don't really matter, all that matters is that you know what you are doing, why and have documented an explanation that would be clear for anyone who wants to understand what you have done and why.