Also known as ‘year-end accounts’ or ‘annual accounts’, these must be submitted to Companies House by all limited companies within nine months of a company’s year-end. Annual accounts will also have to be filed with HMRC, together with a corporation tax return. These are legal requirements and there are penalties for failing to comply.
If you are a director of a limited company, filing statutory accounts is your legal duty. If you are a small business you can either file a full set of accounts or an abridged set of accounts, which is far less detailed but still compliant with HMRC and Companies House requirements.
Your statutory accounts must include:
- The balance sheet, which shows the value of everything the company owns, owes and is owed at the year-end.
- The statement of profit and loss, which shows the company’s sales, running costs and the profit or loss it has made during the financial year.
- Notes accompanying the accounts.
- A directors’ report (though ‘micro entities’ are exempt from this requirement).
Statement of Profit and Loss
The statement of profit and loss shows the performance of the business during any given period. It is a relatively basic trading summary: it will most commonly show how much has been sold (the turnover of the business) and how much has been spent on running the company – including, for example, goods the business has bought for release as well as administrative expenses. If the profit and loss statement has been produced for management, it may be important to consider how the income and/or expenses are displayed. For example, a retail business with multiple premises might wish to show income relating to each individual shop separately.
It is worth bearing in mind that the reliability of the detail included in the profit and loss statement very much depends on the quality of the bookkeeping that has been carried out. Bookkeeping is particularly important when preparing profit and loss for monthly or quarterly management accounts as they inform many of the management’s decisions.
Balance Sheet
The balance sheet is a statement showing the financial position of a business at any point in time. It records the assets and liabilities of the business at the end of the accounting period after the preparation of profit and loss accounts. Balance sheet analysis can show many things about a company’s achievements, allowing creditors, investors and other stakeholders to examine the financial status of the business. Generally, investors and creditors will look at a company’s balance sheet to understand how effectively it uses its resources and what potential return it offers. The balance sheet can be prepared at any time, but is most commonly compiled at the end of the accounting period.
Notes to the accounts
Notes to the accounts enable you to add more context to the balance sheet and profit and loss account.
Directors’ Report
Larger companies which meet certain criteria will also have to submit a directors’ report, which liststhe main activities of the business, how the company performed and its prospects. It will also mention any dividends due to be paid out and list the names of the directors short descriptions of their responsibilities.
Your accounts must be filed within nine months of your company year end. Failure to file your accounts on time may result in a fine of up to £1,500.
You can find about more about statutory accounts here.
