Help with micro entity balance sheet

[BenJacobs]

Hi all,

I need some input in preparing my micro entity balance sheet if somebody could help.

Please don't be brash in saying "use an accountant" or "pay for it" - the company has suffered massively over the last 8 months and there is very little money left to do so, but I want to continue filing as I should.

I just need some help in knowing which figures to use where based on what's going on in the business.

It is a letting agency, and at the moment I have:

Called up share capital not paid: 1 (just myself as a director)
Total fixed assets: 0 (company doesn't own anything tangible)
Total current assets: only money in bank as asset
Prepayments and accrued income: revenue expected from the next month from tenants?
Creditors falling due in the next year: ?
Provisions for liabilities: ?
Accruals and deferred income: ?
Capital and reserves: ?

I'm ont sure on the last 4 - I have an idea of what they mean, but just need it clarified so I know what to enter.

Thank you, and again, I appreciate some may judge, but I'm just trying to learn and get it right.

 

[gpietersz]

terminology explained here: https://moneyterms.co.uk/categories/accounts/

Capital and reserves should equal all assets minus liabilities.

revenue expected from the next month from tenants?

If they will be paying after the period, for a period that is past (or partially so) in the period before the accounts date.

 

[Scalloway]

Prepayments and accrued income: revenue expected from the next month from tenants?

Your share of income due at the date the accounts are prepared to but not yet received. As an agent you should not be putting the full rent through your accounts.

 

[MyAccountantOnline]

Here's what they mean -

Creditors falling due in the next year - these are debts or costs incurred by the company up to the end of the financial year which haven't been paid and are due within 12 months of the end of the year. A good example is Corporation tax (if any is due). Bear in mind sometimes you need to apportion amounts owing to show the amount due within 12 months and the amount after 12 months eg a bank loan.

Provisions for liabilities - this is where the company has a debt but the amount and timing of that debt is uncertain.

Accruals and deferred income - accruals are costs incurred in the period but not billed. Accounts must show all costs incurred in a period so you need to add payments, unpaid invoices and accrued amounts and deduct opening creditors and accruals to arrive at the cost for the year.

Capital and reserves - Retained profits and shares

Are you working from a trial balance created in your software?

 

[BenJacobs]

Your share of income due at the date the accounts are prepared to but not yet received. As an agent you should not be putting the full rent through your accounts.

Would you mind just explaining this a little more for me please? The tenancies were commercial, so the rent would be due to us as the agreement is with us, so would the full rent be the figure that's used? Let's say as of 31/10/2020 I had a tenant that had 6 more months of their tenancy at £1,000 per month, payable on the 5th day of every month, for the Balance Sheet, would I be using the total amount left on the tenancy agreement as accrued income? Or the next month? Or none at all? They're in contracts so technically they're due, but they're not until the due date... if that makes any sense.

 

[BenJacobs]

Here's what they mean -

Creditors falling due in the next year - these are debts or costs incurred by the company up to the end of the financial year which haven't been paid and are due within 12 months of the end of the year. A good example is Corporation tax (if any is due). Bear in mind sometimes you need to apportion amounts owing to show the amount due within 12 months and the amount after 12 months eg a bank loan.

Provisions for liabilities - this is where the company has a debt but the amount and timing of that debt is uncertain.

Accruals and deferred income - accruals are costs incurred in the period but not billed. Accounts must show all costs incurred in a period so you need to add payments, unpaid invoices and accrued amounts and deduct opening creditors and accruals to arrive at the cost for the year.

Capital and reserves - Retained profits and shares

Are you working from a trial balance created in your software?

Thanks so much for your explanation, I appreciate it. Just trying to get my head around it, so forgive me for asking in such layman terms!

Creditors falling due in the next year - I don't believe I have any, what might they be for a letting agent? The items are paid as they're used, e.g. the internet. I don't have any bank loans due or debts, etc.

Provisions for liabilities - perfect, so that looks like 0

Accruals and deferred income - this bit I'm a little lost on, sorry. Would you mind explaining it again for me please? Thank you so much.

 

[UK Contractor Accountant]

The tenancies were commercial, so the rent would be due to us as the agreement is with us,

are you sure? is there a corresponding tenancy agreement between your letting agency and the owner of the property?

 

[BenJacobs]

are you sure? is there a corresponding tenancy agreement between your letting agency and the owner of the property?

Yes, there's an agreement between my company and the owner of the property, and an agreement between my company and the tenants at the properties.

 

[UK Contractor Accountant]

Creditors falling due in the next year -

corporation tax, PAYE, VAT, unpaid bills COUNCIL TAX, rent due to the owner

 

[BenJacobs]

corporation tax, PAYE, VAT, unpaid bills COUNCIL TAX.

PAYE - it's just myself and I don't have myself on PAYE. Not VAT registered. Owner assumes responsiblity of council tax. Tenants were responsible for the gas / electricity / water, etc. though my company responsible for providing internet - so would these bills be added here? The entire annual amount over each property? Or just for what was becoming due (e.g. the next month) at the time of the Balance Sheet?

 

[UK Contractor Accountant]

Or just for what was becoming due (

if its billed & paid monthly by direct debit probably nothing owing.

Tenants Rent deposits. Are you holding any of these?

Does the owner hold a deposit from your company?

 

[BenJacobs]

Yes it's being billed and paid monthly. So no obvious creditors aside from corporation tax becoming due in the year? There isn't anything that isn't accrued and is paid as it comes in monthly.

Yes, there are deposits being held, though held by the scheme, not in our account.

 

[UK Contractor Accountant]

All good to go then with Micro Accounts.

I do several estate & letting agency accounts.

Might need to register for money Laundering Supervision if you have not already done so.

Also if operating a client accounting system where you are acting as an agent for collecting rent & arranging repairs etc you might need a client account Audit.

 

[BenJacobs]

All good to go then with Micro Accounts.

Thanks for help, I appreciate it.

So just to clarify where I am with it now...

Called up share capital not paid: 1 (just myself as a director)
Total fixed assets: 0 (company doesn't own anything tangible)
Total current assets: only money in bank as asset
Prepayments and accrued income: revenue expected from the next month from tenants?
Creditors falling due in the next year: 0
Provisions for liabilities: 0
Accruals and deferred income: ?
Capital and reserves: ?

The parts I need input on are:
(1) Prepayments and accrued income: revenue expected from the next month from tenants? Or from the remainder of their entire tenancy? As of the date of the balance sheet, the tenant would have paid their rent for that current month, with the next month being due the next day... so I don't know if that's accrued income and added here, or anywhere?

(2) Accruals and deferred income: ?

 

[gpietersz]

As of the date of the balance sheet, the tenant would have paid their rent for that current month, with the next month being due the next day.

Then no accrued income from that. Accrued income is earned but not invoiced or due.

If they paid for the current month on the first of next month, that would be different.

 

[BenJacobs]

Then no accrued income from that. Accrued income is earned but not invoiced or due.

If they paid for the current month on the first of next month, that would be different.

Great, thank you. As the only income is only from tenants paying in this way (monthly), there would be no accrued income. How about deferred income in this case? Or is that the same?

 

[MyAccountantOnline]

Yes it's being billed and paid monthly. So no obvious creditors aside from corporation tax becoming due in the year? There isn't anything that isn't accrued and is paid as it comes in monthly.

Yes, there are deposits being held, though held by the scheme, not in our account.

You may not have any creditors or accruals, but it's quite unusual to have received and paid all bills to the end of the financial year by that date. Generally month end bills take a few days to be issued and paid. It is worth checking to ensure you include all costs.

 

[MyAccountantOnline]

PAYE - it's just myself and I don't have myself on PAYE. ....

Slightly off topic but if you don't have any other income you could pay a salary in future to use your tax free allowance (so its tax free income for you) which will save the company Corporation tax.

 

[Spur Support Services]

Sorry to be late to the discussion Ben, but it sounds from your posts and responses as if you are trying to submit a micro balance sheet to Companies House, without preparing the underlying accounts.
This may well leave you in a difficult position when it comes to submitting the corporation tax computation where you need to report income and costs.
You may also find that you overlook balances, especially items such as Director Loan and Corporation tax . Not employing an accountant could result in higher fees in future years if errors have to be rectified, but that may just be a risk that you feel you need to take at this time.

For your nil cost, you could just do your accounts on spreadsheets, or there are some free software solutions out there.

Start with the opening balance sheet from the previously accounts (or just called up share capital and cash paid into bank by Director to buy those shares for a start up)

Then analyse your bank transactions between what they relate to (income, business costs [break down between HMRC categories which includes the wages that you paid yourself], dividends, fixed assets etc.)

Account for "accruals and liabilities", which are costs that the business has benefited from by the year end but not paid for. (increase expenses, create current liability/accrual). An example would be an accountancy bill for completing your submissions, not a good example in your case)

Account for "Deferred income" which in your case would be rent that you have received which relates to the period after the year end. (decrease income, recognise current liability/deferred income)

Account for prepayments which is costs you have paid that relate to periods after the year end
(decrease expenses, increase current assets/prepayments). An example may be annual insurance payments

Depreciation should be charged if appropriate, reducing the Fixed Asset value and increasing business costs to represent the value of the use of the fixed asset over its expected useful life for the business.

Your accounts should give you a list of balances that in total add to zero. This is your "trial balance".
The Income and Business Costs represent the Profit before tax and will indicate whether you have a corporation tax bill to accrue or the potential to recover corporation tax paid in the previous year (subject to adjustments for disallowable costs, capital allowances etc). (this corporation tax needs to be recognised as an additional liability/asset).
The Distributable reserves will be the Distributable reserves b/fwd, plus the Profit AFTER corporation tax, less any Dividends Paid.

The rest of the trial balance items will fall into the asset and liabilities as discussed in other posts.
I would advise using the HMRC online tax return submission facility to submit your accounts to both Companies House and HMRC at the same time to prevent duplication.

I hope this helps.