Accounting help wrt fixed assets and depreciation

Discussion in 'Accounts & Finance' started by EmmaRGillespie, Jun 11, 2020.

  1. EmmaRGillespie

    EmmaRGillespie UKBF Newcomer Free Member

    2 0
    I'm doing my accounts for my 2nd year in business and I'm unsure about a few things and would be really grateful for some advice. Just to clarify, my business hires out clothing so I treat all of my stock as Fixed Assets which depreciate over 3 years. I'm a micro-entity so just doing basic P&L and Balance Sheet.
    1. Do I take into account anywhere the value of Fixed Assets at the start of the year? At the moment I only have the transaction for the Fixed Assets that were bought during the current year.
    2. For depreciation I have used a figure which represents depreciation of ALL Fixed Assets (i.e. the previous year's FA have depreciated by a third PLUS the current year's FA have also depreciated by a third) - is this correct?
    3. I'm unclear what the figure should be for accumulated depreciation on the Balance Sheet. I understand the idea behind depreciation and accumulated depreciation but I don't see how I can balance these out if they are different.
    4. Do I take into account anywhere the Director's Loan/Capital Investment (money put into the business) in year 1? I would think this would go in the Creditors box on the Balance Sheet but then how do I balance this out?
    Thanks in advance
     
    Posted: Jun 11, 2020 By: EmmaRGillespie Member since: Jun 11, 2020
    #1
  2. STDFR33

    STDFR33 UKBF Big Shot Free Member

    4,487 1,189
    These are the basics.

    If you can’t get the basics right, you’ve no chance on the difficult stuff and you don’t know what you don’t know which represents a bigger problem.

    It’d pay dividends (pardon the pun) to engage an accountant.
     
    Posted: Jun 11, 2020 By: STDFR33 Member since: Aug 7, 2016
    #2
  3. MyAccountantOnline

    MyAccountantOnline UKBF Legend Full Member

    13,217 2,477
    1. Do I take into account anywhere the value of Fixed Assets at the start of the year? At the moment I only have the transaction for the Fixed Assets that were bought during the current year.

    Yes you do, if you had fixed assets last year the balance carries forward to year 2 - you should have figures carried forward for fixed assets at cost (ie the price paid for them) and the depreciation to date.

    You have to bring forward all of the balances from last years accounts ie from the balance sheet to ensure the accounts are correct.

    2. For depreciation I have used a figure which represents depreciation of ALL Fixed Assets (i.e. the previous year's FA have depreciated by a third PLUS the current year's FA have also depreciated by a third) - is this correct?

    This years Profit and Loss account should only show the depreciation charge for the year and your balance sheet will show the depreciation brought forward and the charge for the year.

    3. I'm unclear what the figure should be for accumulated depreciation on the Balance Sheet. I understand the idea behind depreciation and accumulated depreciation but I don't see how I can balance these out if they are different.

    The accumulated figure is the depreciation brought forward ie the charge for year 1 plus the charge for year 2

    4. Do I take into account anywhere the Director's Loan/Capital Investment (money put into the business) in year 1? I would think this would go in the Creditors box on the Balance Sheet but then how do I balance this out?

    Yes the accounts must show all income and expenditure for the year so any monies coming into the company from whatever source must be accounted for.

    If you as a director lent money to the company it'll be a loan owing to you by the company. You'd generally have a debit ie a receipt in the bank account and a credit to a directors loan account which will be shown as a creditor.

    Make sure any funds paid for shares are shown correctly.

    (You didn't mention it, and may be aware, but make sure you disallow depreciation when you calculate the Corporation tax - depreciation isn't an allowable expense for tax purposes it's a common error)
     
    Posted: Jun 12, 2020 By: MyAccountantOnline Member since: Sep 24, 2008
    #3
  4. EmmaRGillespie

    EmmaRGillespie UKBF Newcomer Free Member

    2 0
    Thank you so much for taking the time to reply and explain, I really appreciate it.
     
    Posted: Jun 12, 2020 By: EmmaRGillespie Member since: Jun 11, 2020
    #4
  5. MyAccountantOnline

    MyAccountantOnline UKBF Legend Full Member

    13,217 2,477
    You are very welcome. It's what the forum is for :)

    Hope you get it sorted.

    I'm not sure if you are using any bookkeeping/accounting software but if not you may find that it will help especially with bringing forward opening balances. I dont know if it will suit your requirements but VT cashbook is free if you want to minimise costs.
     
    Posted: Jun 12, 2020 By: MyAccountantOnline Member since: Sep 24, 2008
    #5
  6. dal

    dal UKBF Regular Free Member

    469 26
    Not at all helpful!

    Record numbers of people are doing their own accounts; & the accounting profession is witnessing a staggering decline in jobs available (33% decrease to be accurate); this is all for good reason, software is getting better; but the main reason; freedom of information (the internet). Yes there will be some mistakes along the way, but for the vast majority (small businesses) will still be massively in credit by doing their own accounts. It's a learning process & those who will be engaged in business full-time; with 40 years to go, these minor little mistakes will be greatly offset by far greater savings in them doing their own accounts.

    Thank you to MyAccountantOnline for helpful input.
     
    Posted: Sep 12, 2020 By: dal Member since: Jul 26, 2007
    #6
  7. STDFR33

    STDFR33 UKBF Big Shot Free Member

    4,487 1,189
    Been in a coma?
     
    Posted: Sep 12, 2020 By: STDFR33 Member since: Aug 7, 2016
    #7
  8. UK Contractor Accountant

    UK Contractor Accountant UKBF Legend Full Member - Verified Business

    5,071 895
    Therein lies the problem.

    The standard of DIY accounts filed at Companies House is poor - either not complying with the Companies Act or Financial Reporting Standards.

    Companies House will register any old rubbish on the public record. They should be reporting them to the Financial Reporting Council to appropriate action in correcting defective accounts and/or issue fines.
     
    Posted: Sep 12, 2020 By: UK Contractor Accountant Member since: Sep 18, 2013
    #8
  9. KAC

    KAC UKBF Ace Free Member

    1,260 286
    ... and it's not that long ago that CH had document examiners who would reject accounts that did not comply. Now, as you say, they will accept anything even if it doesn't make sense
     
    Posted: Sep 12, 2020 By: KAC Member since: May 7, 2017
    #9