Preparing annual accounts for your limited company
All limited companies registered in the UK have a legal obligation to prepare annual accounts every year. Depending on the size of your company and the complexity of its financial activity, you may be able to take care of all bookkeeping and accounting duties yourself. Most companies, however, hire accountants.
Whatever you decide, it is important to fully understand your company’s accounting obligations. This ensures that your business is compliant and that you’re fulfilling your director’s duties and responsibilities.
What are annual accounts?
Annual accounts are often referred to as ’financial accounts’, ‘statutory accounts’, or ‘company accounts’. Providing a summary of an organisation’s financial activity over a set period of time (usually 12 months), annual accounts are made up of financial statements and records that contain comprehensive information about a company’s transactions, operating performance, and financial position at the end of its financial year.
Limited companies must deliver their annual accounts to:
- Companies House
- HM Revenue & Customs (HMRC) as part of their Company Tax Return
- company shareholders or guarantors (‘members’)
- every holder of the company’s debentures
- anyone who is entitled to attend general meetings
The financial data required to prepare accounts comprises income, expenses, assets, liabilities, and equity. Full annual accounts, which all active companies must prepare for members and HMRC, should generally include:
- a balance sheet
- a profit and loss account
- supporting notes about the accounts
- a director’s report
- an auditor’s report (unless the company is exempt from audit)
However, small companies and micro entities are not usually required to prepare full accounts for Companies House. Instead, they may be permitted to file simpler accounts.
Dormant companies do not need to prepare any accounts for HMRC until they start trading. Whilst dormant, they need only prepare dormant accounts for Companies House.