Hi,

I have a set of accounts for 2009 and it turns out that the liability for tax has not been put through on the accounts for the previous two years. Each year previously an assessment was made at the beginning of the year and this was paid. The actual liability at the end of the year was not posted. So I am at present seeing two refund amounts from tax authorities. On further analysis it seems the liability was not posted in the accounts.

How do I go about rectifying this? I know I have to credit balance sheet tax account, but can I debit the retained earnings or should I put it through current profit as an expense?

Thanks

Chris

I’m not sure you can just debit P&L reserves without an explanation - that would probably get picked up! I’d put the missed years through the P&L. If dividends have been voted hopefully it won’t give you negative reserves.

Dr CT chg P&L
Cr CT liability B/S