All service charge payments are kept in the nominal ledgers and at the end of the service charge year, the accounts are reconciled. This means making one account consistent with another, by allowing for transactions that were started but not yet completed by the end of the year. All the accounting records kept by the managing agent (comprised of the vouchers, records and other information and explanations) and the nominal ledger (containing each asset and liability) are passed to the external accountants. The nominal ledger supports the trial balance which is based on double entry book-keeping so every accounting transaction has 2 parts or ‘sides’. So when the trial balance is run, for every transaction the value of the debit balance column and the credit balance column must have the same totals to agree i.e. one negative and one positive – giving a net balance of zero.

All codes are either held in the Chart of Accounts, which provides structure to the general ledger. It can be tailored to need the needs of the company in the form of manually adding, editing and removing nominal codes and can import a whole new chart of accounts (with or without opening balances). It can also show the general ledger account number which is automatically assigned by the accounting software and split into three columns:

  1. The account name;
  2. The type of the account i.e. asset, liability equity, income, cost of goods sold, or expense;
  3. A description of the type of transaction which should be recorded in the account, i.e. a debit entry or a credit entry. There is much confusion about the inherent meaning of debits and credits so a good way to remember how they work is debits = increase and credits = decrease so the golden rule of DEAD CLIC means Debits increase Expenditure (Rent, Wages) Assets (Cash, Accounts Receivable, Inventory, Land, Equipment, etc.) Dividends (credits decrease them) and Credits increase Liabilities (Accounts Payable, Notes Payable Interest Payable etc) Income, and Capital. (debits decrease them).

In addition to holding Nominal Codes, the Chart of Accounts may also hold:

  1. Expenses codes;
  2. Cost centre codes;
  3. Project codes.

The accountants will then adjust each entry on the nominal ledger through the trial balance in order to properly state them for the purpose of preparing the service charge financial statement at the year-end. Those adjustments cover such reasons as:

  1. Mis-postings;
  2. Reversal of opening balances;
  3. Timing differences for accruals and pre-payments;
  4. Additional invoices for late payments.

For the Year End Service Charge Statement Tech 03/11 requires the following: an Income and Expenditure Sheet, a Balance Sheet, and Notes to the Accounts.

More on this can be read here.




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