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It’s a well-known fact that businesses have to submit a variety of information to both HM Revenue & Customs and Companies House. For example, businesses that are limited companies (or limited liability partnerships), must be able to show their annual statutory accounts. Those that are self-employed will need to be able to calculate and evidence their profits when submitting the annual tax return.
Lots of companies make the decision to use accountants such as Norden’s, to deal with their filings, cuh as accounts and tax returns. However, the director or sole trader of the business retain full responsibility for ensuring that the correct information is submitted on time.
A company that trades as a business must organise annual accounts. These are comprised of both a balance sheet and profit and loss statement, as well as records and a directors’ report. The level of detail required depends on the magnitude of the business. The accounts might first need to be reviewed, though minor businesses (usually with a turnover annually of less than £10.2 million) are typically exempted from this obligation.
A copy of the complete accounts need to go to shareholders and also HMRC (as part of your tax return). Furthermore, you should submit accounts to Companies House, though smaller companies can select to file condensed or even simpler accounts if they meet specific conditions.
Each financial year, you will need to submit a set of accounts. Ordinarily these correlate with the twelve months that lead up to the business’s preceding accounting reference date. The accounts should contain the following:
• Notes to the accounts
• Directors’ report signed by a secretary or director
• Signed balance sheet by a director who represents the board
• Profit and loss account
• Auditors’ report signed by the auditors (except if the business is excused from an audit)
When the directors sign the accounts off and a copy of them is sent to the company members, you should submit them to Companies House.
Current companies need to file their accounts inside 9 months of every accounting reference date. New companies need to file their initial accounts inside 21 months of the date of incorporation.
If you don’t meet the deadline, Companies House can take action to collect missed payments or even close your business down.
What’s a balance sheet used for?
A balance sheet reveals the value of all that the business own, but also importantly, it shows what the business owes as well as what is due to be paid.
The crucial figures for you, or a company like Norden’s to monitor are the ones showing how much money exists in the business.
Also important are trade the amount payable to the company by its clients (trade debtors), alongside the amount the business must repay to its own suppliers (trade creditors).
Balance sheets will also highlight any debts, be they short or long term, and in addition the cost or position of any ongoing loans. These debts will be divided amongst existing creditors, finances allocated within 12 months, and also towards long term borrowings too.
Should a business have multiple loans to pay back, it might not have a lot of extra cash, although this is dependent on the length of time they have to pay the loan back.
What are notes?
Figures by themselves will often only tell one side of the story.
A lot of the numbers will have notes associated with them near the end of the account files. These clarify in more details about who is owed money and also where there might be one-off payments made (fines, for example).
This offers more perspective to business accounts, for instance, they could highlight just where finances are owed to a company, taxman or bank.
What is a Directors’ report?
The Directors’ report summarises the forecasts of larger limited companies and any dividends that should be remunerated to its shareholders.
Larger businesses use it as a chance to look back over the last 12 months, analyse their economic performance, and look forward to the subsequent year.
The report displays the director’s names throughout the year of reporting, as well as the actions of the company and any occasions that could have affected the balance sheet.
What’s a cash flow statement?
The total cash profit that a business makes is not always the surest indication of its condition. This is because there are frequently other expenses to pay for.
The cash flow statement displays both the money that is going into a company, and those that are going out. It will normally contain money from working activities, tax charges, dividends paid, capital spending and returns on investment.
The cash flow statement an effective method of observing how prudent a company is financially, because it demonstrates how well the money is handled. Nonetheless, you would have to examine both the cash flow statement and the balance sheet together, to get a truer picture of the company’s financial incomings and outgoings.
When do I need to file the statutory accounts?
Your initial statutory accounts should be submitted 21 months after registering with Companies House.
From that point, you will have to file 9 months after the financial year of your business.
If your submission is late, then you could possibly face a fine of up to £1,500 – dependant on the length of the delay.
If you run a small business, then you won’t need to file a complete set of accounts to Companies House. Rather, you can file a condensed version, which summarises the key points and typically will exclude the profit and loss accounts. The full version will need to be sent to both shareholders and HMRC, alongside your company tax return.
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In November 2002, having sold our other business interests off earlier in the year, I decided to set up Nordens Chartered Accountants. The easy part was knowing how to do it, as I had established and built a smaller practice a few years earlier, the difficult part was not following the traditional accountancy path. Having run businesses, both successfully and unsuccessfully, I wanted to help business owners resolve their short term problems and work with them to achieve their longer term goals. Business has always been my interest and I love that I can help business owners achieve what seems like the impossible every single working day.
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