Errors in my accounts,how to.....

[Deleted member 25779]

Hi All,

I have not even started to trade and the accounting mistakes are adding themself to the list.
I cannot call my accountant today(sunday),and really need some help for something that might sounds stupid to you but is creating an headacke for me.
I am trying to understand a list my account gave me, in this list are all the "repairs" for the year ending 30.04.08, but, i cannot understand a few things.

Here is an example of the list and also the problem i have:


9.Directors Loan 100.00 Dr
Share Capital 100.00 Cr
Being Initial Shares

10. Accountancy 650.00 Dr
Accruals 650.00 Cr
Being provision for accountants fee year 30.04.08



I cannot understand the number 10.
I am using quickbooks2008 pro, i know how to debit 650.00 from the accountancy journals but i have no idea about the "Accruals", what is it? and how shall i set it up in quickbooks?
.income
.expense
.fixed asset
.bank
.loan
.credit card
.equity

other choices:
.Account receivable
.Other current asset
.Other asset
.Account payable
.Other current liability
.Other income
.other expense

I am new to the accountancy and i am completly lost. I have also the language barrier causing me a few troubles with the technical terms that no dictionnaries can translate.

Thank you very much for your help and i hope someone can help me a little bit.

Regards,



Bambam

 

[Will_M]

Hi there,

An Accrual is a current liability.

An accrual is basically accounting for an expense before you have had the bill (apologies if you knew that, but not too sure from your post)

 

[Deleted member 25779]

HI WILL_M,

Thank you very much for your reply, but there is something i do not really understand, why register this current liability in my software and not wait for the bill(i have it now).
Also, if i do register this current liability,this should not affect my balance right?


Regards,


Bambam

 

[CassioAcc]

You should be posting these adjustments to last years accounts so they show the correct position at the time. You may have the bill now but you would not have had it at the year end (30.04.08).

When you post the bill in the current year then it will be offset by this accrual in the accounts.

To be honest, if this does not make sense to you then your accountant should be posting these. If you do not post as expected they may need to make more adjustments.

 

[Will_M]

HI WILL_M,

Thank you very much for your reply, but there is something i do not really understand, why register this current liability in my software and not wait for the bill(i have it now).
Also, if i do register this current liability,this should not affect my balance right?


Regards,


Bambam

At your year-end of 30.04.08 you probably didn't have the bill from your accountants so he is correct in making an accrual for these fees (prior to sending you his invoice).

So as at 30.04.08 you would have the following balances:

P+L : Accounting Costs : £650 Dr

Balance Sheet : Current Liabilities-Accruals : £650 Cr


When you receive the actual bill from your accountant (in the new financial year) the entries would be

Balance Sheet : Current Liabilities-Accruals : £650 Dr

Balance Sheet : Current Liabilities - Creditors : £650 Cr

(Note : no effect on the P+L Account in the new financial year as you have already accounted for it in the year to 30.04.08)

When you actually pay the bill, the entries would be:

Balance Sheet: Current Liabilities-Creditors : £650 Dr

Balance Sheet : Cash/Bank : £650 Cr.

Hope this helps.

Will

 

[elaine@cheapaccounting]

Accounts work on what is called the accruals system - basically this means that you needs to account for sales and costs in the year to which they relate.

You accountant charges you for the prep of the accounts but bills you in the next year. However this fee must be in the year.

Record is as a current liability:

debit accounting
credit accruals / current liability

then when you pay you should record the payment as follows:

debit accruals / current liability
credit bank

Some system work on something called reversing journals but I am not going there!!!