Understanding the difference between unpresented items and Year-End adjustments is crucial when completing the Year-End process. Below, we clarify when these concepts are relevant and how they should be handled.
These are transactions that have taken place but do not appear on the bank statement. They should not be mistaken with items that should have been paid or received but have not been executed yet. These cases would fall under Year-End adjustments. Unpresented items and Year-End adjustments are distinct concepts, explained below.
Payments or receipts transacted before 31st March, but not reflecting on the bank statement by this date, are classified as unpresented items. An example could be a cheque written and sent out on 15th March but cashed on 10th April. At the end of the financial year (e.g., 31st March), this payment would not have been recorded on the bank statement. However, since the payment has been made by the council, it will appear in their cashbook and will be included in the Year-End figures. Therefore, it will be part of the Year-End bank reconciliation as an unpresented item.
Box 8 equals the total statement balances as at 31st March minus any unpresented payments, plus any unpresented receipts. It should show what the year-end bank position would have been if all the unpresented items had been transacted.
Councils may have unpresented items regardless of the accounting approach they use for their Year-End (Receipts & Payments or Income & Expenditure). As councils shift away from cheques to instant payment methods, unpresented items are becoming less frequent.
To manage unpresented items in Scribe, simply enter payments made or receipts received before 31st March in the usual way. If these transactions do not appear on the bank statement on or before 31st March, leave the transaction unticked in the 'Bank' → 'Reconcile' screen. Scribe will automatically update the closing bank balance for the value of any unpresented items. You can check this total by running 'Reconcile All Banks' as at the 31st March.
Year-End adjustments are relevant for those working with the Income & Expenditure approach. Adjustments for creditors (suppliers you owe) or debtors (customers who owe you) are made to account for timing so that the accounts reflect an accurate picture of the income and expenditure related to the financial year.
These adjustments might involve invoices related to the financial year that won't be paid until the new year (creditors), expected costs that won't be paid until the new year (accruals), payments made in the current year that relate to the new year (prepayments), customers who haven't paid for goods or services provided in the current year (debtors), or customers who have paid in the current year but won't receive the goods or services until the new year (receipts in advance).
These adjustments will reflect a true picture of your accounts. For example, creditors should be added to Box 6 (Other Payments), and debtors will increase Box 3 (Other Receipts). Adjustments should be net values as VAT is not included when working in Income & Expenditure.
To make Year-End adjustments in Scribe, after identifying the necessary adjustments, enter them by navigating the menu Year End → I&E/Adjustments. Scribe will automatically create an adjustment for the VAT owing from or to HMRC based on the closing position on the VAT Summary. All other adjustments must be entered manually.
Once added, run 'Calculate'. Scribe will automatically update the Annual Return to account for the adjustments. The 'Working Document' report will show how these adjustments have updated the figures from Receipts & Payments to Income & Expenditure.
For a detailed explanation on Year End adjustments, watch the short video by Hannah, our Head Accountant, below.