During the current financial year, a reallocation was made regarding the director's company pension contribution made during the year ended 31 March 2024. This contribution was recorded under the director's loan account. It has now been reclassified as Employers Pension Contributions. This adjustment has resulted in a reduction of the profit before tax by £20,000 for the prior year.
The impact of this adjustment is as follows:
- Income Statement: The reclassification increased the Employers Pension Contributions expense, thereby reducing the profit before tax by £20,000.
- Balance Sheet: The director's loan account decreased by £20,000, and retained earnings were adjusted accordingly.
- Taxation: The reduction in profit before tax has led to a corresponding decrease in the corporation tax liability.
This adjustment ensures that the financial statements accurately reflect the nature of the pension contribution and provide a true and fair view of the company's financial position.