Hi John

This sounds like an accounting error, not a Sage error. Let’s say you owed £100 interest in year 1. The journal in that year would be debit interest, credit accruals. The same in year 2 and year 3. By now you’ve got £300 credit in accruals and have correctly shown interest in each accounting year. If you then actually pay that interest, the BP should be posted against accruals, not interest, as you have already provided for it.
Your question suggests that you have accounted for the same interest twice. Look back in prior years to check that interest was shown, even though it wasn’t paid. If so, you need to correct the posting in last year: debit accruals, credit interest for the sum that has been double counted.

Apologies, if you are posting into a year that you’ve closed, it would be debit accruals, credit retained profit (likely to be 3200 or nearby).

Hi Anita,

I greatly appreciate you help

I'm away on a training course today, but i shall try this out.

I am unsure how it will affect my bank balance if I debit accruals, but I shall try it out.

Best regards,

John

Hi Anita,

I greatly appreciate you help

I'm away on a training course today, but i shall try this out.

I am unsure how it will affect my bank balance if I debit accruals, but I shall try it out.

Best regards,

John

It’s a nominal ledger journal so it will only affect the accruals and the retained earnings accounts. It won’t touch your bank account.

Again, thanks for your help Anita.

I think I see the problem. Interest was never posted to the interest nominal in the previous years, it's all been entered in one lump this year. To make matters worse the accruals were entered manually at year end by my accountant. 

The procedure I followed was to add payable interest to each person's loan account. I then made journal entries to move it to the interest and tax nominals, but I did the bank payments from the bank account.

If I understand this correctly, I was not able to put the unpaid interest into accruals, as the balance was already there from manual year end entries. Would I need to reverse those entries and then put my interest balance into accruals? I should cancel the bank payments from interest nominals and instead make then from accruals.

As our accounts are now much simpler, I am doing them myself, so I no longer have an accountant. This si just a legacy issue from our directors loans and I have never had to deal with such in sage before.

Best regrds,

John

John, don’t cancel or edit the bank payments or it will mess with the bank reconciliation, VAT return and year end postings. The journal I suggested will fix it. Without wishing to be rude, I do think you need an accountant.

Anita

Thanks for your time Anita and you are probably right about the accountant.

I do have a very experienced chartered accountant helping me to file, but as he is corporate, he has no knowledge of Sage.

I'm doing my best to work my way through it and your help has been invaluable.

best regards, John

I got there in the end Anita. It was the confusion between revenue and balance sheet items that threw me.

I had thought balancing off these amounts with the P&L nominal would affect my profits for the year, but this ledger is a balance sheet item and as the accruals moved across, my assets increased, as this was no longer a liability. The year end profit was unaffected, since the amount had already been taken from the bank account, thus reducing my annual profit.

But many thanks. Your tutelage was invaluable to get me thinking in the right direction.

best regards,

John