Made a School Boy Error with Accountant
Discussion
I bloody trusted him!!!
I am quite sure he is also trying to make me go crazy. It seems he has made an error (in my eyes) and is almost trying to cover it up rather than get to the bottom of it.
Basicallly it comes down to him missing out stock that was used to start the company. This I would assume would be opening stock and then you add your purchases through the year and deduct closing stock, you are left with the stock value used for the sales for that trading period. Well my accountant bloody seems to think otherwise.
He says: The opening stock would not matter as due to the closing stock figure I provided would mean that any other adjustments would be made to closing purchases.
Is he winding me up or is it me that is wrong?!
I am quite sure he is also trying to make me go crazy. It seems he has made an error (in my eyes) and is almost trying to cover it up rather than get to the bottom of it.
Basicallly it comes down to him missing out stock that was used to start the company. This I would assume would be opening stock and then you add your purchases through the year and deduct closing stock, you are left with the stock value used for the sales for that trading period. Well my accountant bloody seems to think otherwise.
He says: The opening stock would not matter as due to the closing stock figure I provided would mean that any other adjustments would be made to closing purchases.
Is he winding me up or is it me that is wrong?!
Countdown said:
It can be accounted for on the other side of the balance sheet. There will be a value for retained profit and a value for Directors loan (or whatever).
He said his closing stock is correct (as he provided the number to the accountant), but doesn't mention his cost of sales is correct. If he introduced X of stock to the business which hasn't been accounted for, his directors loan account (Cr) and cost of sales (Dr) are going to be out by the £X of stock introduced.
This is essentially correct -
"He's right.
Opening stock + Purchases - Closing stock = Cost of Sales
If Closing stock and CoS figures are correct them OpStock and Purchases balance each other out".
HOWEVER, as the initial stock sold by the company was bought by you personally, how was the introduction of this stock into the company accounted for in the books and records of the company.
Obviously, there would have been no actual payments for this stock made by the company so you would not see any actual money transactions in the COMPANY'S books and records for the purchase of this stock. Therefore, as far as the COMPANY was concerned, it did not physically buy this stock.
The company has acquired the stock from the director and it will have certainly generated Sales Income by selling some or all of this stock during its first year of trade. You will therefore want to offset the cost of this stock against the sales generated when it was sold (the "Matching" principle).
The normal accounting entry for the introduction of items for resale purchased by the director before the company started trading would be -
Debit "Purchases"
Credit "Director's Loan Account".
Have you checked with your accountant to enquire if he made this accounting entry?
Is there a balance owing to you on the director's loan account and, if so, have you asked your accountant for an explanation of th balance?
There would be no "Opening Stock" figure as such in the first set of accounts of the company because the company did not have a "Closing Stock" from a previous year to bring forward.
"He's right.
Opening stock + Purchases - Closing stock = Cost of Sales
If Closing stock and CoS figures are correct them OpStock and Purchases balance each other out".
HOWEVER, as the initial stock sold by the company was bought by you personally, how was the introduction of this stock into the company accounted for in the books and records of the company.
Obviously, there would have been no actual payments for this stock made by the company so you would not see any actual money transactions in the COMPANY'S books and records for the purchase of this stock. Therefore, as far as the COMPANY was concerned, it did not physically buy this stock.
The company has acquired the stock from the director and it will have certainly generated Sales Income by selling some or all of this stock during its first year of trade. You will therefore want to offset the cost of this stock against the sales generated when it was sold (the "Matching" principle).
The normal accounting entry for the introduction of items for resale purchased by the director before the company started trading would be -
Debit "Purchases"
Credit "Director's Loan Account".
Have you checked with your accountant to enquire if he made this accounting entry?
Is there a balance owing to you on the director's loan account and, if so, have you asked your accountant for an explanation of th balance?
There would be no "Opening Stock" figure as such in the first set of accounts of the company because the company did not have a "Closing Stock" from a previous year to bring forward.
Countdown said:
sgrimshaw said:
You're not an accountant are you.
I am you know .. 20 years + 
Go on...ask me a question....
ETA Looking at Eric's explanation I can see what i did wrong there...
ETA - you're not the OP's accountant are you?
Edited by sgrimshaw on Thursday 25th February 11:25
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