Company Accounts - Bank Statements

Andy Stewart gurgled happily, sounding much like they were saying:

I'm surprised your accountant has never asked for them before. I've always been asked to provide them, by several accountancy companies.

An audit is _far_ more wide ranging than just double-checking your book- keeping against the statements.

as per Adrian, my accountant has requested them for 23 years..........

Your accountant has his own reputation to protect. He could just believe you - but if you tell a fib and are caught out the theory is that he and all his clients suffer collectively

You should be pleased he is taking sensible precautions - asking for the bank statements is the minimum and is normal.

When he gets to know you and knows he can trust you maybe he'll "cast a blind eye"...

One other thing, this phrase:

"I have always reconciled receipts and payments against the bank statements..."

Is not at all the same as: "I have reconciled the Bank Account"

Unless you have done it formally - which would require a bit of accountancy knowledge - then you haven't done it.

Many small Ltd Co businesses leave non-business Ltd Co expenditure out of the accounts altogether (for example) and that is wrong.

Eh? How do they manage that? It must be somewhere (repay Directors' loan a/c's, divs etc.) otherwise things won't balance....

Erm...by not using a double entry system.

Many small entities don't. A simple P&L gleaned from what happened, or what probably happened, and a Balance Sheet assembled from the few known facts is very common, inside & outside the profession.

Very easy to "reconcile the bank".

Troy Steadman wrote in news: snipped-for-privacy@t26g2000prh.googlegroups.com:

Thanks to all for the input so far.

Yes, it does seem perfectly reasonable for the accountant to be cautious and protective of his reputation.

We recently moved over from a sole tradership to limited and previously the bank statements weren't required/requested, hence the question.

He's previously requested condensed information to save us money and to save him getting bogged down in excessive detail. There have been a few screw ups and delays this year so I wondered if the lack of statements was being used as an excuse.

Erm...by not using a double entry system.

Many small entities don't. A simple P&L gleaned from what happened, or what probably happened, and a Balance Sheet assembled from the few known facts is very common, inside & outside the profession.

Very easy to "reconcile the bank".

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Do you mean submit false figures, in the hope that the extent of the lies (compounded over several years) won't be spotted? I guess Enron and most banks thought they could get away with it, so why not the man in the street? :-(

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No I don't mean that at all.

It is very common for people who are not accountants to get into the most tremendous muddle over their bookkeeping. Amounts are entered incorrectly, then correct incorrectly, and chaos ensures. No matter how much time you spend analysing nonsense all you will ever come back to is more nonsense.

It is perfectly valid under those circumstances to "fix" the correct figures by whatever means possible. If I give you a formal Bank Reconciliation and tell you that is the figure I am using in my Balance Sheet, you reckon it's "false" unless I acheived it by "double entry"?

Isn't Lesson 1 in accountancy "Incomplete Records"?

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Troy

Are you saying that the bank balance in the statutory accounts is not the same as the bank account?

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Martin is not talking about double entry as much as using the correct figures.

You appear to be saying that if a payment was for non-business purposes you would ignore it and treat the bank balance as if it had more funds than in reality.

Martin and myself would show the correct balance and say that the director (or whoever) owed the company money. this could lead to all sorts of sorts of financial and other penalties.

The accountant wouldn't need to duplicate any work if you gave him a copy of your bank reconciliation.

A client of mine decided to use Sage, against my advice, because his "brother in law told him it was good".

He sent me his data file and it was a total mess. I recommended a meeting to discuss it but he didn't think it was necessary. He seemed to just want me to correct the mess every time.

I explained he needed to do a bank reconciliation but he said "I've checked that all the entries are correct"

When we did meet and I told him what a mess it was and he should have done a bank reconciliation he repeated that he'd checked the entries. Besides scores of differences I pointed out that the net wages and the PAYE and NIC had massive credit balances. He said that he thought that because his payroll integrated with accounts he didn't need to do anything. He seemed to assume that somehow his payroll would know all about when and if he paid his employees and HMRC without him having to tell it!

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om...

What I am saying is that many otherwise intelligent business people don't include non-business expenditure in their cash book, for what seems to them the very good reason that it is non-business expenditure, and so has no place in the business. Obviously that is wrong and it seems to me the OP might be doing just that - he reconciles receipts and payments against the bank statements; you and I would "reconcile" or "agree" the bank.

Where have I suggested using the incorrect balance?

This then is exactly the the everyday scenario I envisaged.

Maybe you attempt to untangle the mess and correct it. Maybe you will be able to, maybe you won't.

A common alternative is to ignore the records and try construct the accounts around what you know *must* be true:

1) You know the bank balance. 2) You know the wages. 3) You know the net profit - must generate enough drawings for the proprieter to live on. 4) You know the overheads - about the same as they were last year

...and so on. That is not at all the same (Martin) as:

submitting... "false figures, in the hope that the extent of the lies (compounded over several years) won't be spotted"

om...

.com...

The following exchange implied it, unless by accounts you mean the accounting records and not the financial statements.

Troy: Many small Ltd Co businesses leave non-business Ltd Co expenditure out of the accounts altogether (for example) and that is wrong.

Martin: Eh? How do they manage that? It must be somewhere (repay Directors' loan a/c's, divs etc.) otherwise things won't balance....

Troy: Erm...by not using a double entry system. Many small entities don't. A simple P&L gleaned from what happened, or what probably happened, and a Balance Sheet assembled from the few known facts is very common, inside & outside the profession. Very easy to "reconcile the bank".

You did say it was wrong.

Somebody asked me to train him on QuickBooks. His accountant hadn't given him any information on year end adjustments. There seems to be a lot of accountants around like that! The trade debtors in the accounts were "£25,000". I said that amount looks very "round". He said the accountant phoned him up and asked him to guess what the debtors were and his guess was £25,000!

My client left me with the words: "I know I've messed up. I don't care what it costs just put it right."

Now he's complaining about my invoice!

By the way, I was able to untangle the mess. I always am. It just involves determination. I compare transactions on the bank statement to the cash book on a big spreadsheet.

Yes, you just have to work out the reconciling transactions.

Yes

That's not very precise, is it?

That's not precise, either.

Unless you do a proper bank reconciliation and review the debtors and creditors you will not begin to get close to a useful set of accounts. It's important to do it properly - not just for Companies House and HMRC - but for the client to progress in future years.

PeterSaxton wrote in news: snipped-for-privacy@e18g2000yqo.googlegroups.com:

A very good point, hopefully our workings will be understandable for him or if not he can give me some pointers on how to make them so for next year.

My guy is keen on Sage but a chum with a company of similar size is fond of Quickbooks. Any recomendations on software for a small service based company, 4 employees, 250k tunover, 10 invoices/mth, 10-20 supplier invoices/mth but lots & lots of small cash & CC expenses. I'd prefer to avoid Microsoft products. We sub-contract our payroll.

I hear what you say (and others in other posts), you must have seen the situation hundreds of times where a well meaning mess is landed on your plate at the last possible minute.

I can't claim to have a wholly polished halo but hope that we've made good attempts at creating workable company records that minimise the work of our accountant. I have taken note to ask him if any changes to our record keeping would make his life easier as easier for him in, in the long run, easier for me.

Troy Steadman wrote in news: snipped-for-privacy@v5g2000pre.googlegroups.com:

Yes, there is some guilt there.

If cash is drawn for expenses and the receipts don't cover the amount drawn then the deficit is recorded as a drawing against the Director's Loan Account.

I agree wholeheartely but "best practice" is not always possible, starting from where we start from. If the accounts are not materially wrong they are pretty much right. People who analyse every penny then make sweeping round sum assumptions on (for example) Stocks or WIP or Accruals are squandering their client's fees (arguably).

Also my method has "grandfather rights" over your method. Overall Proprieter Drawings = Overall Proprieter Spending may not be "precise", but if your accurate figure don't come back to *precisely* that conlusion, it is your figures that are wrong.

Take your average builder:

1) He does work cash in hand. 2) He employs other builders cash in hand. 3) He cannot resist claiming all input VAT back from the VAT man.

You can analyse his bookkeeping all you like but you'll never be able to produce his accounts.