how to account for deferred payment

[BonzoDog]

My micro company employed the services of a legal advisor in 2022. Some of the work was carried out provided during the 2021 - 2022 financial year and continued until 2023.
Should we have recorded that expense as a differed payment, or something else on accounts for 2021 - 2022?
Or, as the invoice was not provided until 2023 as a 'job lot' bill. Can the full accounts and reports for previous years ignore it entirely?

 

[MyAccountantOnline]

My micro company employed the services of a legal advisor in 2022. Some of the work was carried out provided during the 2021 - 2022 financial year and continued until 2023.
Should we have recorded that expense as a differed payment, or something else on accounts for 2021 - 2022?
Or, as the invoice was not provided until 2023 as a 'job lot' bill. Can the full accounts and reports for previous years ignore it entirely?

At the end of the financial year you need to consider if any of the charges were prepaid (paid in advance) and if so you adjust for a prepayment. You generally do that by adding a journal and you credit legal and professional fees and debit prepayments with the total.

 

[BonzoDog]

At the end of the financial year you need to consider if any of the charges were prepaid (paid in advance) and if so you adjust for a prepayment. You generally do that by adding a journal and you credit legal and professional fees and debit prepayments with the total.

Thank you, on a related note. If bills, Invoiced to the Company were paid by the Board of Directors. Would that Invoice be a cost to the Company or the individual of the Board?

 

[MyAccountantOnline]

Thank you, on a related note. If bills, Invoiced to the Company were paid by the Board of Directors. Would that Invoice be a cost to the Company or the individual of the Board?

If it's a company cost (incurred by and for the company) paid by the directors it would generally still be a company expense and treated as a directors loan.

 

[BonzoDog]

If it's a company cost (incurred by and for the company) paid by the directors it would generally still be a company expense and treated as a directors loan.

Thank you. This is where it gets difficult. the company is dormant with no bank account. so it wants to remain dormant by having the members pay any bills out of its own pocket. some bills Invoiced to the company are paid directly by the members. some are paid as loans, for which the members then expect to be repaid directly. how, if necessary are they recorded in annual returns?

 

[MyAccountantOnline]

Thank you. This is where it gets difficult. the company is dormant with no bank account. so it wants to remain dormant by having the members pay any bills out of its own pocket. some bills Invoiced to the company are paid directly by the members. some are paid as loans, for which the members then expect to be repaid directly. how, if necessary are they recorded in annual returns?

You need to bear in mind dormant means different things for tax purposes and for Companies House.

Have a read here - https://www.gov.uk/dormant-company

The costs will need to be included in the company accounts.

 

[BonzoDog]

You need to bear in mind dormant means different things for tax purposes and for Companies House.

Have a read here -

The costs will need to be included in the company accounts.

Thank you. I've read those. For Companies House, They do not answer whether a 'significant' transaction excludes transactions which do not go through a company bank account. such as if bills or costs, invoiced to the company are paid by members directly, does that avoid significance?

 

[Bobbo]

Thank you. I've read those. For Companies House, They do not answer whether a 'significant' transaction excludes transactions which do not go through a company bank account. such as if bills or costs, invoiced to the company are paid by members directly, does that avoid significance?

No.

Very hard for anyone to answer without knowing why this company doesn't have a bank accounts and there is a reluctance for it to have any transactions. If members are paying the company's bills and expecting to be repaid then that effectively is a loan to the company. How is the company ever to repay these loans if it doesn't have a bank account with which to receive funds.

As @MyAccountantOnline mentioned, dormant means different things depending on who you ask and this company is probably not dormant.

 

[MyAccountantOnline]

Thank you. I've read those. For Companies House, They do not answer whether a 'significant' transaction excludes transactions which do not go through a company bank account. such as if bills or costs, invoiced to the company are paid by members directly, does that avoid significance?

What sort of costs have the directors been paying for the company?

You can exclude Companies House fees.

 

[BonzoDog]

What sort of costs have the directors been paying for the company?

You can exclude Companies House fees.

Bills which are Invoiced to the company include property Insurance and Service and maintenance costs. These have been paid direct by individual members of the company (the shareholders). other legal fess have been paid similarly. Invoiced to Co. Ltd, paid by members.

 

[MyAccountantOnline]

Bills which are Invoiced to the company include property Insurance and Service and maintenance costs. These have been paid direct by individual members of the company (the shareholders). other legal fess have been paid similarly. Invoiced to Co. Ltd, paid by members.

It's difficult without knowing the amounts and more about your company but I wouldn't generally say those sort of costs are insignificant for a small company.