A Beginner’s Guide to Preparing Annual Accounts
Setting up a small business can be a tremendously rewarding and satisfying experience, but it isn’t without its challenges. As a business owner, you’ll have to wear all kinds of different hats: not only will you be the company’s director, but you’ll also have to deal with things like statutory accounts.
Completed annually, statutory accounts act as a financial summary. They outline your company’s performance over the previous 12 months, providing HMRC, Companies House and key stakeholders with an overview of its current financial position.
As you can imagine, this makes them extremely important: mistakes in your annual accounts can have significant consequences for your business, potentially landing you with a hefty fine. They have to be submitted on time, and they have to be accurate.
To help you get your head around the process, we’ve put together a beginner’s guide to preparing annual accounts. Below, we’ll cover exactly what your statutory accounts need to include, who they need to be sent to, what standards they need to meet and when they need to be submitted.
What your annual accounts should include
There are four key elements that all statutory accounts should include:
- Balance sheet: A list of all your company’s assets and how much they’re valued, along with details of amounts you owe and are owed. Your balance sheet must be correct as of the last day of the financial year.
- Profit and loss statement: Details of your company’s earnings and expenses, along with a summary of how much money it has earned (or lost) over the course of the financial year.
- Director’s report: Smaller businesses and ‘micro-entities’ don’t need to worry about this one. However, as your company grows, you may eventually need to prepare a director’s report as part of your annual accounts, which summarises the business’ financial position in a more in-depth, contextualised format.
- Notes on the accounts: Numbers don’t always tell the whole story. If you need to provide additional information to help explain your accounts or clarify things, your account notes are the place to do just that. These notes are sometimes used to provide additional insight into future projections as well as to add context or supporting evidence to back up your company’s past performance.
All statutory accounts must meet either International Financial Reporting Standards or New UK Generally Accepted Accounting Practice – and all of them must bear the name and signature of a director.
As your business grows, you may also need to begin adding an auditor’s report to your annual accounts. Completed by a third-party auditor or chartered accountant, this document evaluates the ‘truth and fairness’ of your accounts, confirming that they’re accurate and that they’ve been completed to the required standards.
Small businesses, micro-entities and dormant companies are able to submit simplified, ‘abridged’ statutory accounts. If you’re unsure whether your business falls into this category, check with HMRC or your accountant.
Who needs to see your annual accounts?
Statutory accounts need to be submitted to a variety of different organisations and individuals.
- HMRC (your statutory accounts should be submitted along with your tax return)
- Companies House
- Shareholders and any individuals that are able to attend your company’s general meetings
When to submit your annual accounts
Statutory accounts are always compiled and submitted at the end of each financial year and can be submitted online. After you prepare your first accounts, you’ll have 21 months from the date of your company’s formation to submit them to each of the relevant parties.
Speak to Stonehouse Accountants today
Annual accounts preparation can be an extremely time-consuming and challenging process, particularly if you have no prior accounting experience. That’s where companies like Stonehouse come in.
We have more than four decades of experience in small business accounting, we have the know-how to help with all of your bookkeeping and accounting needs. From recording accurate financial data to compiling your accounts and tax returns and submitting them on time, we make the entire process as hassle-free and straightforward as possible.
Over the years, we’ve helped hundreds of businesses in a multitude of different industries flourish with our affordable and fully scalable accounting services. From payroll to VAT, our flexible and affordable services are here to make life as a business owner that much easier.
Interested in learning more about what we do? Speak to our Peterborough-based accountants today to get your questions answered.