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Receivables and accrued payroll

Moosa Tamijuddin (Finance and Project Controller) (115 Points)

20 January 2018

Gentlemen, one of my best accountant friends has run into problems recently in his company:

1. Per advice of his boss, the guy removed the opening balances of some of the customers during this financial year. Now his Trial Balance is showing an account "Difference in Opening Balances" How to rectify this?

2. His boss wants to adjust the payroll amounts due to some of the employees. Hence it has to be done in the Accrued Payroll. How to do this without affecting the bank balances or petty cash.

Thanks for your replies.

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4 Replies

CA Jyotsna Mishra (-) (49 Points)
Replied 21 January 2018

1. Use the audited/final balance sheet of previous year and balance statement for previous year from respective parties to rectify this error.

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Moosa Tamijuddin (Finance and Project Controller) (115 Points)
Replied 22 January 2018

Dear Jyotsna, would you please eloborte your reply. My friend has issued credit notes for those removed opening balances, but they are not picked up in the Bills Receivable ledger of customers.

Please help.

thanks

CA Amrita Chattopadhyay (Audit & Assurance) (13459 Points)
Replied 25 January 2018

If the opening balance can be removed in the current year by writting off the liability. In such case it will effect the income statement of the current year. If the opening balance of the debtors is to be written off in the current year, it has to be shown as expenses in doubtful debts.

If the credit notes are issues, they can be picked up in Bills Receivable ledger only if proper reference against which bill it is issued is mentioned.

Moosa Tamijuddin (Finance and Project Controller) (115 Points)
Replied 25 January 2018

Dear Ms.Amrita, Thanks for the reply. But I have something to let you know. In any Financial year, you can't touch the Opening Balances because they are the figures that have been already submitted to the Taxes Dept and the IT amount also settled. You need to supplement with more informations to your company Auditor in support of it.

I have advised my friend to settle this way. I have asked him to issue Credit Notes to the respectives customer accounts (with reference to the Invoices issued as you mentioned), taking it to Sales Return Ledger a/c. which will be a Liability. This Liability will be offset the Sales Ledger figure at the end of the year.

In the case of PayRoll, I asked my friend to check the monthly accruals of each employee and locate whereever the entries were made with less / more payment situation.

Thanks again for replying.

TAMIJUDDIN M