I can’t figure out why this has happened but on the Tax Summary page it shows my Distributable profits are much higher than my current bank balance. And that doesn’t even allow the corporation tax I have to pay.
I have just done the year end for the previous account and it retained 2,400 (approx) to carry over to the next year but at the time as I said this was higher than my bank balance.
Would the best solution be to… manually take the corporation tax away from the bank balance at the time of year end and anything left enter that into the retained profits box?
Please help this has really confused me.
a couple notes…
I have deleted the account and re done everything as accurately as possible, twice now to account for any mistakes I could have made.
The opening balance of the account was 0 and was only opened last august
It’s hard to say exactly without looking into your accounting records.
One thing that springs to mind is that the year-end journals and tax summary are calculated on an accrual basis, but you’re comparing these figures with your cash position (i.e. your bank balance). If you’d had a number of sales invoices outstanding at the year-end, this would report a higher profit that would not yet have been realised in your bank balance.
There’s also capital purchases (i.e. purchasing equipment such as plant/machinery), that would effectively lower your bank balance but not your taxable profits.
It appears the Corporation Tax hadn’t been added to my end of year journals.
I assumed the end of year tool would have done this automatically even though it is an estimate.
Once I manually added the corporation tax it seems to add up a lot better now.
Although I still have a difference of around £500 that it says is distributable that isn’t in my bank account.
Could this be down to the plant and machinery as you said, although it is £369 of plant/machinery purchased. And as you said they do not come off against profit… so if it was this I would have more to pay in tax and less in the bank account?
I’m afraid issues like this are outside of the support we offer, and I recommend speaking to your bookkeeper or accountant. They would be best placed, and are more qualified to advise on your situation (I’m not an accountant).
However, it’s still worth noting what my colleague mentioned above, in that your figures are accrual based which is based on your invoices entered, rather than your cash position.
If you don’t have an accountant, we could certainly help by putting you in touch with one if you wish?