What adjustments should I make (reverse) early in the new financial year?
Where you have accounted in the prior financial year for Accounts Receivable (money owed), Accounts Payable (money you owe), Prepayments (money paid in advance), or Deferred Income (money received in advance), you will need to reverse these adjustments when the corresponding transaction actually takes place or becomes due in the next.
- On 31/12/2020 you accounted for £2500 of Income-tax recovered for Q4 of the 2020 financial year. This £2,500 was received into your accounts on 15/01/2021. This now needs to be reversed out, so that this income isn't double-counted.
- on 31/12/2020 you accounted for £950 of HMRC PAYE and NI contributions, relating to staff employed in December 2020. This was actually paid on 09/01/2021. This now needs to be reversed out, so that this expenditure isn't double-counted.
You can choose to reverse these adjustments on day 1 of the new financial year, or on the actual date that the cash transaction takes place, according to your preference. The reversal will adjust the category total of the income or expenditure category affected. Within the Adjustment screen- Creditors and Debtors table, you can review all the adjustments, selecting the appropriate type from the drop-down list. Any adjustment requiring reversal has a 'Reversal' (two-way arrow) button to the right-hand side.
If you're using the detailed dashboard view (as opposed to the flow view) set in System Settings, the number of outstanding adjustments is recorded in the Overview tab.