Why do we need Accounts?
Accounts are needed for a number of key reasons, the main one being as the basis to calculate operating profits and to calculate personal or corporate tax liabilities. Accounts are also used for strategic planning, providing information for management and shareholders, legal compliance with the Companies Act and for securing business finance.
Our Qualified and experienced staff plus industry leading software ensure that your accounts are prepared in the correct format, using the right accounting standards and get submitted in a timely manner.
We prepare your accounts in house and do not out source or use sub-contractors.
See below information regarding deadlines and fines for not submitting accounts in time!
More information regarding Accounts is provided below;
As a general guide there are a number of principal formats that Accounts can take depending on the specific operating circumstances.
1) Income and Expenditure
An Income and Expenditure Account is the accepted format for not for profit organizations such as a local sports club or a local Village Hall. I & E accounts are normally prepared on a cash basis and where the primary motive is not profit related. However the Income and Expenditure Account can also be an acceptable format for small Sole Trader operations where there is a profit motive.
2) Trading and Profit and Loss Account
The primary reason why people set up businesses is to make profit, if unsuccessful, losses may also be incurred. The trading and profit and loss account summarizes these activities. The Trading and Profit and Loss Account is applicable to Sole Traders, Partnerships and Limited Companies. The top part of the calculation (The Trading Account) shows gross profit which is the excess between sales and cost of goods sold (or a gross loss if cost is higher). The next section is the Profit and Loss account which consists of gross profit less total administration and operating costs to arrive at the net profit or loss.
3) The Balance Sheet
The balance sheet is a financial statement that shows what the business is worth at one point in time. It does not record operating results. A standard balance sheet has three parts, assets, liabilities and ownership equity or capital. Again a balance sheet is applicable to sole traders, partnerships and Limited Companies.
The balance sheet is divided into two parts that, based on the following accounting equation, must equal each other, or balance each other out. The main formula behind balance sheets is:
Assets = Liabilities + Capital (Owner’s Equity)
As the balance sheet is a snapshot at a single point in time of the businesses’ accounts – the balance sheet, along with the Profit and Loss Account, is an important tool for business managers and owners to gain insight into the business and its operations.
4) Limited Company Accounts
If you operate a Limited Company, you have to produce full “Statutory” Annual Accounts to send to Companies House and to HMRC along with a Corporation Tax Return.
|File annual accounts with Companies House||9 months after your company’s financial year ends|
|File a Company Tax Return||12 months after your company’s financial year ends|
|Pay Corporation Tax||9 months and 1 day after your company’s financial year ends|
These deadlines are for private limited companies.
Statutory Accounts must include a Balance Sheet, a Profit and Loss Account, notes about the accounts, a Directors report and an Accountant’s/Auditors Report.
A director must sign the Balance Sheet and their name must be printed on it.
Statutory Accounts must meet either International Financial Reporting Standards or UK Generally Accepted Accounting Practice.
Download Financial reporting standards for small entities here.
If you run a Small company, you are exempt from audit and only need to file abbreviated accounts.
Your company will be ‘small’ if it meets 2 of the conditions below:
- its turnover is less than £6.5 million
- it has less than £3.26 million on its balance sheet
- it has fewer than 50 employees
If your company meets the legal requirements for ‘small’ companies, you can:
send shorter (‘abbreviated’) accounts to Companies House created from the statutory accounts – this means less information about your company will be publicly available, use the exemption so your company’s accounts don’t need to be audited, choose not to file a copy of the director’s report.
Abbreviated accounts are the balance sheet from the company’s statutory accounts. The balance sheet must be signed by a director and their name must be printed on it. You must still send full ‘statutory’ accounts to shareholders and to HMRC with your Company Tax Return.
Fines for not getting your Accounts in on time
Late filing penalties were introduced in 1992 to encourage directors of limited companies to file their accounts on time because they must provide this statutory information for the public record.
The Current table of Companies House fines
|How late are the accounts delivered||Penalty – Private Company|
|Not more than one month||£150.00|
|More than one month but not more than three months||£375.00|
|More than three months but not more than six months||£750.00|
|More than six months||£1500.00|