In the UK, company accounts refer to the financial statements that a company is required to prepare and submit to Companies House and HM Revenue & Customs (HMRC) each year.
The financial statements typically include the following:
Profit and Loss Account
This statement shows the company’s revenue and expenses for a given period (usually a year) and the resulting profit or loss.
Balance Sheet
This statement shows the company’s assets, liabilities, and equity at a specific point in time. The assets are what the company owns, the liabilities are what the company owes, and the equity is the difference between the assets and liabilities.
Cash Flow Statement
This statement shows the company’s cash inflows and outflows for a given period and the resulting cash balance.
The purpose of company accounts is to provide information about a company’s financial position, performance, and cash flow to its stakeholders, including shareholders, creditors, and tax authorities. It is important for a company to keep accurate and up-to-date accounts to ensure compliance with legal and regulatory requirements and to make informed business decisions.
How does the company accounts work in UK
In the UK, companies are required to prepare and submit annual accounts to Companies House and HM Revenue & Customs (HMRC) in accordance with the Companies Act 2006 and other relevant legislation.
The process of preparing company accounts typically involves the following steps:
Financial Year End
The company’s financial year end is the date on which its accounting period ends. The company must prepare its accounts for the period from the previous year end to the current year end.
Gathering Financial Information
The company must gather financial information about its business operations during the accounting period. This information may include sales invoices, purchase invoices, bank statements, payroll records, and other financial records.
Recording Financial Information
The company must record this financial information in its accounting records, using appropriate accounting principles and standards. This will involve creating a trial balance, which is a summary of all the financial transactions for the period.
Preparing Financial Statements
The company must prepare financial statements based on the accounting records, including a profit and loss account, balance sheet, and cash flow statement. These statements must comply with relevant accounting standards, such as Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS).
Submitting Accounts
The company must submit its financial statements to Companies House and HMRC within nine months of its financial year end. The accounts must be accompanied by a directors’ report and an auditor’s report (if required).
Reviewing Accounts
The accounts will be reviewed by Companies House and HMRC to ensure they comply with legal and regulatory requirements. The company may be required to provide additional information or make corrections if the accounts are not deemed to be accurate or complete.
Overall, the purpose of company accounts in the UK is to provide stakeholders with a clear and accurate picture of a company’s financial position, performance, and cash flow. By ensuring that company accounts are prepared and submitted in a timely and accurate manner, companies can comply with legal and regulatory requirements, make informed business decisions, and maintain the confidence of stakeholders.
