During the prior year, the company purchased investments amounting to £60,000. These were incorrectly recorded under Costs in the Profit and Loss Account instead of being recognised as Investments within fixed assets on the Balance Sheet.
In addition, an amount of £3,376 relating to personal expenditure of the director was also included within costs in error.
In the current year, the misclassification has been rectified by:
Transferring £60,000 to Investments.
Transferring £3,304 to the Director’s Loan Account.
The company is a holding company and is currently not trading. Accordingly, the adjustment does not affect taxable profits for the year, nor the corporation tax computation. Losses previously reported will be adjusted in the current Corporation Tax return, with the appropriate amount being surrendered.