[kingkongsajang]

Do you have a bank statement per bank account?

So for example, if you had 3 bank accounts with Natwest, you would get 3 bank statements? Therefore if you asked Natwest for a bank confirmation letter, would that single bank confirmation letter, include the balance per statement of all 3 bank accounts
(3 bank statements) you have with the bank?

If I also had 1 bank account with HSBC, then does that mean as an auditor, I would have to request another bank confirmation letter to HSBC?

In essence, you are not checking whether the bank has got it wrong i.e whether the balance per bank statement in the bank statement issued by the bank, is different to the confirmation letter balance, also issued by the bank. Rather, you are looking at whether there was a human error in bank reconciliation, by the human incorrectly transferring the actual balance per bank statement, when they were conducting a bank reconciliation?

So in essence, like you mentioned, the bank confirmation letter is just another confirmation that the balance per bank statement is accurate (there is no way the bank could get it wrong though?)

Thank you very much

[kingkongsajang]

what happens when the cheque bounces, and the bank is unable to claim the fund from the customers bank?
How would you adjust the cash book entry that was already made?
Do you debit receivables and then credit cash by the cheque amount?

does it show up in the post-year bank statement that the cheque bounced bank? in which case you were wrong to consider it as an unpresented cheque?

I guess not clearing the unpresented cheque could be seen as an attempt to lower the cash (asset) stated in the SFP without actually having your actual cash levels reduced (since it is not actually sent to supplier to take money out)?

thank you in advance

[kingkongsajang]

5. are you checking for completeness because you would expect the unprecedented cheque before the year end, to be present in the year end cash book but not present in the year end bank statement due to the time delay in which the bank clears it?

6. is it not possible for an unprecedented cheque to be before the year end, but the bank to clear it and process it in the bank statement by the year end?

7. Doesn’t trace the unprecedented cheque to pre-year end cash book and post year end bank reconciliation only refer to unprecedented cheques, just before (near the end) of the year-end, and that was not processed by the bank, so not included in the bank statement until after the year-end?

Thanks in advance

[kingkongsajang]

sir, for bank reconciliation, do you start from the balance per bank statement, make adjustments for outstanding lodgement and unpresented cheques to get a revised cash book balance, that should be equal to the year-end balance per cash book?

therefore if you verify that the revised cash book balance (which goes into SFP) is the same as the balance per cash book at the year end, then it means that the bank reconciliation was supposedly accurate?

but to check it was accurate, you would redo the bank reconciliation to see that it is arithmetically correct?

what happens if you checked that the revised cash book balance from reconciliation, is equal to the balance per cash book at the year end, but you discover that the bank reconciliation was arithmetically done inaccurately.

does it mean it was not accurate?

[kingkongsajang]

Hello Mike,

I was just confused about par values in finding dividend yield with share capital which brought to mind this conversation.

If you don’t mind,

if there was 50,000 equity shares of 20cents in the trial balance, why would you multiply 50,000 by 5 to get share capital?

share price was $2.4 dividend yield was 4% so since dividend yield = dividend paid per share/ share price

I get that you multiply 2.4 x 4% but I don’t understand why you just don’t x 50,000 to this..

is the par value always 1?

Any help would be greatly appreciated.

best regards,
kingkong

[kingkongsajang]

so in this instance as their AA is 10,000 and they do cannot bring any unused AA forward even if there was any, since they were not a member of a pension scheme before, they are restricted to 10,000. This is because that is lower than their maximum allowance which is the higher of 3600 and relevant total income, which in this case, the maximum allowance would be relevant income, which is clearly higher than than AA of 10,000. Hence restricted by AA rathe than maximum allowance.

-Great thank you very much

[kingkongsajang]

That really clarifies thank you!

Q. Just to further solidify my understanding, this may sound stupid,

but if it says gross ‘PERSONAL’ pension contribution then its always contribution into a personal pension scheme, and if it says ‘gross pension contribution’ it is ALWAYS contribution to an occupational pension scheme (i.e must have been a member of the occupational pension scheme then)?

Thank you

[kingkongsajang]

so in essence, the unused basic rate band is considered as gains qualifying for ER. So if you had £9 million qualifying business assets for ER and then an unused basic rate band of £10,000, the actual qualifying amount for ER would be £9million + £10,000 (unused basic rate band). Such that unused rate band just uses the ER like any other qualifying business assets for ER?

-Thank you very much for your helpful reply.

[kingkongsajang]

what about a car used for business purposes?

or a car that was bought and sold for less than £6,000

(these are conditions which is an exception to the general rule for wasting chattels that wasting chattels are exempt from Capital gains tax)

thank you

[kingkongsajang]

I know that, but I’m just saying in a hypothetical situation where only the basic rate tax would be extended, the effective gap between the basic rate and the higher rate which is usually £115,000 (£34,500 – £150,000) would actually be less by the gross amount of charity donation made right?

[kingkongsajang]

so if only the basic rate tax limit was extended, then effectively the initial gap from basic to higher rate (i.e £34,500 to £150,000 – so £115,000 difference) is reduced by the amount basic rate limit is extended?

[kingkongsajang]

Could you clarify sentence 2 please? how could the difference occur due to these assessable benefits? how are the employers aware of something that the HMRC are not or is it the other way around?

[kingkongsajang]

so the total taxable income even if it is broken down into different income, has one basic rate band limit and one higher rate band limit and one additional rate band limit applied first to NSI, then SI, and dividend income (if any left)?

[kingkongsajang]

But if the dividend income is £36,000 then is it not in the higher rate tax band so will be charged 32.5%? Isn’t 38.1% for additional rate tax band?

[kingkongsajang]

i.e 2. Does the PAYE system deduct all the employment income tax to be paid?

[kingkongsajang]

If all the tax for employee’s salary is deducted at source via PAYE, why is there tax liability left to pay?

Does it come from the other incomes tax charges?

[kingkongsajang]

5. Is it compulsory for the employer to use PAYE system to deduct employment income tax ? i.e do all employers do it?

[kingkongsajang]

1. So all of the profits are effectively owed to the members/shareholders of the company?
But if there has been an accumulated loss so that the reserve is a debit figure, this is basically saying we owe you profits but there’s a loss so we have a -ve liability I.e need to cover for the loss as well for you?

2. Share holder capital is the issued capital gains which is used to generate profit for the shareholders – so even if not all the profit is given as dividends, all the profits are theoretically owed to shareholders?

3. If there’s net loss then the reserve account is a debit balance, so reduce that from share capital. If there is a net profit then the reserve account is a credit figure and so you add it to share capital to get shareholder funds?

Thank you very much sir for your help and patience

[kingkongsajang]

1. What I understand so far is that shareholders funds, via share capital and reserves ( – I don’t get how this is different to share capital, i thought you can only gain funds from shareholders by issuing shares and the shareholders buying those shares – ) is the amount that the company owes to the shareholders not compulsory, but would be in the good interest to do so, otherwise they would lose interest in the company right? so thats why they issue dividends? to show strength and stability and to keep shareholders happy?

2. you get rid of reserves from shareholder capital because it is accumulated losses not accumulated gains – might sound like a stupid question, but it means that rather than the company having made profits it actually made realised losses, and therefore it effectively doesn’t have a reserve account, it just has a negative balance?

3. SO how is reserve and accumulated losses different to showing it as a negative figure in the retained earnings? i thought it was the retained earnings account that recorded accumulated realised losses and profits?

[kingkongsajang]

This was for how promoters could avoid liability for pre-incorporation contracts.

So the way that a promoter can avoid being held personally liable for pre-incorporated contracts would be to delay the completion of whatever his contractual obligation that he has to perform is? e.g if he had to complete building of a wall, he would wait the completion intentionally until after the company was incorporated and the company had the legal capacity to enter into contract as a seperate legal entity?

[kingkongsajang]

So reserves are basically the proportion of shareholders funds that you owe to shareholders but just choose to keep right? How exactly are share capital and reserves different? I thought reserves increased if there’s greater profit?

[kingkongsajang]

So it’s not the cost of fixing the problem to what it should have been, if the cost of remedying it exceeds the actual cost incurred?

Therefore it’s basically what the actual damage incurred is, which may not be the difference in value between what it would be if supplied as contracted, and what the value is when there is breach of contract?

[kingkongsajang]

So for an accountant, including a limiting liability or assume no risk paragraph IN the written RESPONSE to the specific request for information, cannot be sufficient to restrict or avoid liability?

As in, it is only valid for limiting liability, and it is only possible to do so by the paragraph usually at the beginning of the auditor’s report?

Thank you sir

[kingkongsajang]

1. Why does a negative figure in the reserve account indicate a debit balance?

2. And why is it that the amount in the reserves account are taken out of the capital?

I thought net assets = Total assets (NCA + CA) – current liabilities…

3. So does that mean reserve accounts are a liability account? – how so?

[kingkongsajang]

Ah now that you say it, that does make a lot of sense.. but he didn’t receive anything back because he already sold it elsewhere – why is that?

2. So when would putting them back to the position they were in before the contract was formed, be a sensible choice as a remedy for damages?

Thank you sir!

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