Hi,
I have discovered an omission in previous years accounts where having purchased high value items intending to put them through the annual depreciation process I did not.
At the time for example Office Equipment items were tagged to the 0030 nominal code and would presumably remain as a non-depreciating asset for ever.
Having now had some issues with actually depreciated items I needed to drill down and do a full analysis of all fixed asset section of the accounts. I have located info about QF and retrospective depreciation but this is largely to do with situations where users are coming on stream with QF and have historical ‘assets’ that they want to manage.
I have calculated the cumulative depreciation values for the years to the point where the planned depreciation period of 5 years has been reached to the book value(s) should be zero in this case. One item has one year remaining.
What I get is a double counting of the 0030 amount that should be written down. Should the P&L 8xxx series of nominals play any part in this historical situation.
Normally the way you handle depreciation is to create a journal each year that does a credit on 0031 and a debit on the corresponding 8xxx code for the amount of depreciation for that year. The balance sheet credit reduces the NBV, the 8xxx debit shows that year’s depreciation as an expense on P&L.
if you want to create these journals retrospectively then you’d need to delete any intervening year end journals and move your account lock date back far enough to allow you to create the backdated journals, then re-run the year end process to recreate the YE journals and move the lock back to where it should be. The extra journals will affect your P&L for the prior years but not in a way that affects your tax position, since you add back the P&L depreciation when calculating taxable profit (and then separately claim capital allowances on your tax return, but those don’t appear anywhere in QuickFile).
Hi,
Thanks for the detailed reply.
Your first paragraph covers exactly how I entered the earlier assets and the very latest so I feel ok with that.
WRT the retrospective depreciation as some of the items would/should have been written down to zero book value as at 31st July is there not some day of just writing-off the original asset valuation?
Finally, I had always understood that QuickFile will not allow backing out of the year end journals that the previous year is ‘sealed’. Has the method you described been proven to work from someone in the current user base?
Regards, Nigel
If the NBV would end up as zero then I guess instead of crediting the year’s depreciation to 0031 you could debit the total accumulated depreciation so far to 0031 and credit the original purchase price to 0030.
First of all, are you running a limited company or operating as a sole trader? If you are a limited company, then there are a couple of ways of dealing with this, depending on whether the difference is material or not.
You wouldn’t usually have to re-submit earlier years’ accounts, but you should correct the comparatives to show the position as it would have been had you entered the depreciation correctly from the beginning. This doesn’t have to be done in QF, but it can be easier to do it that way, and then the comparatives will show correctly when you run this year’s accounts.
If it’s not material, then you can just do the adjustment in-year - especially if you’re not filing a P&L anyway. This would be to debit retained earnings (P&L account b/f) and credit accumulated depreciation with the amount that should have been charged up to the end of the previous year. Then enter depreciation correctly from the current year.
If you need the comparatives to show the correct in-year depreciation, because it is material, then reverse the year-end journal, do the journal above, but this time last year’s depreciation should be a debit to 82** and credit to 0031 and the balance b/fwd would be debit to retained earnings and credit to 0031.
Then re-run the year-end journal and it should correct the comparatives and b/f position. Then make sure you run depreciation each year.
If you’re a sole trader, you can just adjust it all through retained earnings, and not worry about correcting the comparatives at all.