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Annual Accounts Preparation Guidelines

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Overview

Every company is obligated to prepare annual accounts, serving shareholders, HMRC, and Companies House. Small companies may avoid audits if meeting two of the following criteria: annual turnover under £10.2m, total assets under £5.1m, or 50 employees or fewer.

Legal Requirements

  • Submit HMRC accounts online with the tax return within 12 months of the financial year end.
  • Companies House accounts must be filed within nine months of the year end.
  • Small companies can file abridged accounts based on turnover, assets, and employees.
  • Directors ensure accuracy; accountant involvement doesn’t reduce this responsibility.

Statutory Accounts

Annual accounts, known as statutory accounts, consist of:

  • Directors’ report (business review, performance, and prospects).
  • Balance sheet (financial position on year-end).
  • Profit and loss account (trading performance).
  • Notes (details about balance sheet and profit and loss).

Accounting Records

All companies must maintain detailed records of income, expenditure, assets, liabilities, stock, and relevant documentation for tax returns.

Planning

  • Use accounting software to simplify and minimise errors.
  • Consult with an accountant before switching accounting systems.
  • Ensure accurate figures align with invoices, bills, and bank statements.
  • Consider tax-planning steps before the year end.
  • Discuss necessary information and explanations with the accountant.
  • Schedule a closing meeting with the accountants for feedback.

Purchases and Sales

  • Maintain clear and logical accounting records.
  • Cross-reference transactions for traceability.
  • List outstanding debtors and creditors.
  • Aged lists reveal potential issues.
  • Include only invoices for the current financial year.
  • Establish a systematic bookkeeping trail.

Stock and Uncompleted Work

Stock value is crucial for retail and manufacturing; conduct regular stocktakes.

  • Record unfinished work for service providers.
  • Valuate stock based on cost or expected selling price.
  • Include details in the stock list matching supplier price lists.

Fixed Assets

  • Maintain a fixed-assets register with purchase details.
  • Record assets purchased, sold, or scrapped during the year.
  • Keep ownership documents.
  • Depreciate assets annually; consult with an accountant for capital allowances.

Employees

  • Accurately handle payroll and expenses claims.
  • Verify calculations to avoid liabilities.
  • Keep records for all expense claims.
  • Pay tax on benefits in kind through payroll.

Feedback Meeting

  • Schedule a feedback meeting with the accountant.
  • Discuss improvements to bookkeeping, VAT handling, and record-keeping.
  • Evaluate the need for accounting software upgrades.
  • Explore ways to enhance credit control and reduce bad debts.
  • Seek advice on tax reduction strategies.

Filed Under: Company, Company Law, Financial Reporting

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