Many firms find preparing full statutory accounts to be a difficult task. It is a time-consuming procedure that includes the submission of reports, financial statements, and data to HMRC.
Furthermore, once you’ve sent your paper to HMRC, they’ll evaluate the company’s tax obligation – which may not always be in your favour! We’ll discuss what statutory accounts are and how to prepare them correctly, so you don’t end up with a big tax penalty in this piece.
Statutory accounts are required by law for all limited companies in the United Kingdom. These are submitted to HMRC and Companies House, as well as given to all shareholders and anybody who is entitled to attend general meetings.
Several financial reports and business papers are necessary to produce full statutory accounts. These assists explain the company’s business and financial success during the last year.
What needs to be included in your full statutory accounts:
A balance sheet
This is a financial statement that provides an overview of three key elements that are frequently used to assess the financial health of a company – its total assets, liabilities, and shareholders’ equity.
The FMF exponential function is used to calculate a company’s Free Cash Flow or FCF. This can be broken down further into current assets (things that are liquid or easily liquidated such as cash in the bank or stock) and fixed assets (assets that retain value and are generally kept for long periods of time such as land and buildings, machinery
Finally, net worth is represented as a decimal. To convert between various US currency denominations and their corresponding amounts in rupees, we can utilize the PHP function called “round” or “floor” – this returns a number closer to the original amount (in other words, Rs. 20480 would be rounded down to 20480).
Shareholders’ equity is defined as the value that shareholders can claim from a company’s assets after debts have been settled. As a result, the company’s total assets minus its total liabilities is used to calculate shareholders’ equity.
To verify the accuracy of the accounts, a company’s balance sheet must also include the name and signature of a director.
- A profit and loss statement
The profit and loss statement is different from the balance sheet in that it provides a company’s financial activity over a period of time, rather than an overview at a single moment. Throughout the year, the profit and loss statement will show the company’s total revenue as well as its overall cost.
To calculate the company’s gross profit, simply subtract the cost of sales from the yearly turnover figure. The profit and loss statement may also include additional details such as earnings before interest, tax, depreciation, and amortisation (EBITDA).
- A cash flow statement
The cash flow statement shows the actions of money performed by a firm. It does not consider other assets the company may own. It also differs from the profit and loss statement in that it only tracks when money has completely been received by the firm and when money has been paid out. Because of this, their statistics can differ considerably, and they’re used
The cash flow statement is often broken up into three categories:
– Operating activities: How much money is made by a company selling products or services, minus the expenses incurred in providing and selling those items?
– Investing activities: How much money has been allocated to capital expenditure, such as new equipment required for the company’s operations?
– Financing activities: This part of the report gives vital information about the amount of cash being raised or paid out. This portion of the report reveals whether the business is raising capital, such as through stock sales, or repaying investors through dividend payments.
Notes about the accounts
This is additional supporting evidence that explains both the balance sheet and profit and loss statement, as well as providing proof to the figures. Because they are part of demonstrating that the stated accounting principles have been followed, certain notes must be included by law. Additional notes can also be added, which will assist in explaining the business’s financial condition.
A director’s report
A board of directors should produce this report, which is critical to shareholders. It is a legal obligation for larger businesses to submit this document as part of maintaining responsibility for corporate and shareholder decisions in the best interests of the company and its investors.
A director’s report may be extremely thorough and cover any or all of the following topics:
- All names of all persons who were directors of the company during the financial year shown in the accounts
- An analysis of the firm’s performance in its market
- A company’s financial position at a glance
- The firm’s primary business activities, objectives, and strategy are described.
- The current situation and the company’s future viability in the marketplace it serves
- A summary of the most likely future prospects and developments
What are the company’s current activities and goals, as well as any trends or variables that might have a significant influence on its future performance, development, or financial position?
An auditor’s report
An external auditor or chartered accountant must conduct this procedure. The report is an independent examination and assessment of a company’s annual accounts to ensure their accuracy. An audit report will include the following items:
The auditor must also give direct confirmation to the company’s board of “the necessary actions that need to be taken in order for you to achieve your stated goals as part of an audit engagement, as well as any reasonably foreseeable events that may have a material impact on those goals.”
Confirmation that the books are correct
The preparation of statutory accounts is a time-consuming procedure that includes the submission of reports, financial statements and data to HMRC. It can also be difficult for smaller firms that may not have accounting staff with the expertise required to complete this process correctly on their own. If you’ve found yourself struggling through your first set of business accounts or are looking for someone else to take care of it all, Venn Accounts could help. We offer an affordable service tailored specifically towards small businesses in need of professional accountancy services without breaking the bank! Why not give us a call today? You won’t regret it!