"Shareholders funds must equal Total net assets"

[Redline]

Hi Guys.

New to the forum and hope you can help. No doubt this question has been asked a hundred times. But after having a quick search I wasn't able to find an existing thread that answered my specific problem. Appoligies if the answer is in an existing thread somewhere.

I'm just in the process of filing my Audit Exempt Abbreviated Accounts for the very first year/time. And only have a few days left before the deadline.

I'm sure some people will probably say that I should be using an Accountant for this. But as I'm providing nothing but a freelance service for physical man hours provided to companies within their office/work place. Nothing that involves Fixed Assets, Current Assets is only cash in the bank and there are never any creditors needed for what I do.

I hope you can forgive me for attempting the Audit Exempt Abbreviated Accounts myself.

The question and hopefully the fix is very simple.

The only fields I've filled out are 'Cash at bank and in hand' at £212. Which the document then transferred to 'Total current assets' at £212, 'Net current assets (liabilities)' at £212 and 'Total assets less current liabilities' at £212.

And 'Profit and loss account' at £4,380, which the document then transferred to 'Shareholders funds' at £4,380.

I can see that the 'Shareholders funds' is - "Total shareholders investment in a company, either directly (via issued share capital) or indirectly by allowing some of their retained profits to be re-invested."

But when I go to the 'Check Figures' box I get the message..."The Balance Sheet does not balance. Shareholders funds must equal Total net assets (liabilities)."

A quick look at the fields that make up the rest of 'Total net assets' - them being Creditors, Provisions for liabilities and charges, Accruals and deferred income, doesn't immediately reveal to me what info or figures I've missed out and where it should go.

NOTE: The 'Accruals and deferred income' field is described as..."Income received relating to a subsequent accounting period. Accruals and Deferred Income should be entered here - not included in the Creditors due within one year Total Current liabilities figure"

But the statement... "Income received relating to a subsequent accounting period"...is confusing me. As I thought 'Deferred Income' was ONLY income received during an accounting period, but for which the company HAS NOT yet supplied the goods and services as at the end of the period. (This is not the case for me as I am only paid upon completion of the work). And 'Accruals' are expenses for which invoices have not been received at the end of an accounting period.

But the... "Income received relating to a subsequent accounting period"...makes it sound like I put the income I HAVE RECEIVED for the year into this box anyway.

NOTE: Thinking it would solve the problem. I've just put the income for the year which was £7,700 in to 'Accruals and deferred income' but I'm still getting the message..."The Balance Sheet does not balance. Shareholders funds must equal Total net assets (liabilities)."

Could anyone be so kind as to tell me what info needs to go into which one of those 'Total net assets' fields to correct the message..."The Balance Sheet does not balance. Shareholders funds must equal Total net assets (liabilities)."

Or is there other info that needs to go elsewhere?

Many Thanks, James.

 

[Jaydee]

James

You no doubt need some share capital too.

But the problem that you are having is that you made £4,380, have no debtors or creditors, and yet only ended up with £212 in the bank.

So the system wants to know what happened to the remaining £4,168 - perhaps you paid it to yourself as a dividend?

The other issue that you have is that a profit of £4k, with no assets to claim allowances on, is very likely to produce a Corporation Tax liability.

This needs to be calculated and will reduce your profit and also be a creditor.

Perhaps doing it yourself is not as easy as it first looks!

 

[Redline]

James

You no doubt need some share capital too.

But the problem that you are having is that you made £4,380, have no debtors or creditors, and yet only ended up with £212 in the bank.

So the system wants to know what happened to the remaining £4,168 - perhaps you paid it to yourself as a dividend?

The other issue that you have is that a profit of £4k, with no assets to claim allowances on, is very likely to produce a Corporation Tax liability.

This needs to be calculated and will reduce your profit and also be a creditor.

Perhaps doing it yourself is not as easy as it first looks!

Yes. You could say I've paid myself a dividend of the difference - £4,168.

Edit: But can't see where that info would go.

Would this balance everything up that the document is looking for?

 

[David Griffiths]

Yes. You could say I've paid myself a dividend of the difference - £4,168.

Would this balance everything up that the document is looking for?

It would balance the document but it wouldn't be correct. What about the corporation tax?

 

[InPrintImaging]

It takes several years to learn everything that you need in order to produce a set of accounts. From the above, you don't understand basic double entry bookkeeping (extended trial balance), accounting concepts and how they are adjusted for in the bookkeeping, statutory formats for accounts, share capital, and I rather suspect, the tax situation (and that's a none exhaustive list). You may also fall foul of the IR 35 subcontractor limited company rules depending on your circumstances.

For someone set up as a small sole trader (ie not a limited company) doing your own returns may be viable with a very small unincorporated business, but once you are involved with companies house I have to say you would be highly unwise not to have a professional (ie an accountant) to do this for you, as the consequences of getting this lot wrong can be serious.

Not to be harsh there, but I feel the need to point it out, because you are messing around with something that is technically complex and the first question you asked is extremely basic (why doesn't my balance sheet balance), which suggests when companies house dig deeper, they might find further problems, which you didn't even know were an issue. I used to work in accounting before a career change a few years back and have seen situations like this before. Companies House just keep sending back the records as incorrect untill they finally get annoyed and order you to get someone to do it.

My advice would be to go for a smaller local practice and try to get some one on one tax advice from them while you are there. They can generally give you some useful information on minimising your tax bill and staying within the law.