Can someone please help on how I disclose a previous year P & L adjustment.
A provision for a bad debt was made in a previous years accounts. The following year cash was reveived for the provision reversing the bad debt.
The problem is HMRC will not allow the 1st years bad debt provision therefore CT should have been a higher amount and the following year a lower amount.
How is the cash received shown if not by reversing the bad debt? Can I obmit the increase in the second years P&L and add an additional line in Capital & Reserves b/f that will increase the previous years profits?
Is it not just the case you reverse the provision in the current year and disallow the reversed provision in the 2nd year.
If the provision was disallowed in the first year then it is reasonable to expend that the reversed provision should also be disallowed.
At the end of the day this will have the same effect on the overall tax liability across the two years as though the provision wasnt made (which is effectively the case if you reverse the provision in year 2 and disallow the "income").
Yes the reversal of the bad debt provision will go the P&L account. Will look a bit strange in that is a minus expenses (assuming no other provisions in year which offset it). Then disallow the reversal of bad debt provision "income" in the tax comp.
