What is included in my company accounts?

Every business must keep accurate financial records or risk falling apart. Most jurisdictions require all registered businesses to file annual accounts with the government. It’s necessary to know what should be included in your company accounts, and this article will explain that.

What Are Company Accounts?

They are detailed, accurate records of all financial transactions that your business engages in. They detail the profit and loss over a specific period, usually the preceding 12 months. Many jurisdictions require registered businesses to file annual accounts with the corporate governing body and tax authorities.

All corporations in the United Kingdom (UK) must file annual accounts with Companies House. Failure to do so incurs fines, and the company would be deregistered if it doesn’t file for a long time. Directors could also be incriminated and personally fined.

British companies must send a prepared copy of their annual financial statements to Companies House, their shareholders, and HM Revenue & Customs (HMRC).

What Is Included In Company Accounts?

It comprises many records, including

Balance Sheet

The balance sheet is a record of everything the business owns and owes. It lists the assets and liabilities on the company’s books.

• An asset is anything your business owns that can be assigned a monetary value. It can be current assets, e.g., cash in the bank and short-term securities, or fixed assets held long-term, e.g., machinery, real estate, equipment, etc.

• A liability is any money your business must pay another individual or corporation at a future date. It can be short-term liabilities, e.g., VAT and income taxes, or long-term liabilities like bank loans.

Profit and Loss Account

The accounts include an accurate estimate of your company's profit or loss over the relevant period. You’ll summarize your transactions into two categories:

• Income: Money that comes into your business.

• Expenses: Money that goes out of your business.

Profit is your income minus expenses over a given period. If the number is negative (you spent more than you earned), it becomes a loss.

There are two income and expense accounting methods: cash and accrual basis. Cash basis means recording an income or expense only when money changes hands. Accrual means recording an income or expense immediately after an invoice is generated, regardless of when the money comes into or goes out of your account.

British companies can use the cash basis if their annual turnover is less than £150,000. Anything above that amount requires the accrual accounting method for the financial report. 

Director’s Report

A director’s report is a document that provides an overview of your company’s operations, prospects, and financial position. It’s a document that stakeholders can read and easily understand what your business is doing and whether it’s in good standing. 

This report must be signed by an appointed director or company secretary on behalf of your company's board. "Micro-entities," i.e., small and dormant companies, must not include a director's report in their accounts, but other types of companies must include it. 

Auditor’s Report

You must include an auditor's report if your business meets one of these criteria:

• Annual turnover of over £10.2 million.

• Assets of over £5.1 million.

• Greater than 50 employees.

An auditor's report is a signed statement from a licensed auditing firm acknowledging that your financial report was properly prepared and gives an honest view of the company’s financial position. 

Notes

You can include any additional information to contextualize the financial report.

How Can I Prepare and Submit Accounts?