Year-end accounts can easily present a nightmare for companies when the time comes.
Not only is it easy to get them wrong, but there is the threat of fines for mistakes and late payments.
With something so important only coming around once a year, year-end accounts are easily forgotten and the process can become rushed and sloppy.
Here is what to expect when reporting your financial year-end and how to prepare information for your accountant.
What are year-end accounts?
Year-end accounts are also commonly known as statutory accounts.
The end of the ‘year’ for your company, in this context, refers to the financial year and not the tax one, which runs from April 6th to April 5th. This means that one company’s year end can differ from another’s entirely.
These accounts are a legal obligation for limited companies, and must be filed with Companies House. They are detailed accounts of your company’s financial activities, including profits and losses and a director’s report.
Year-end accounts verify the financial actions of your business all add up and that everything has been logged, both coming in and going out. Accountants working on these accounts will carefully consider every piece of information and check for discrepancies that might get overlooked.
What is needed for year-end accounts?
Considering the activity a company can undergo within an entire year, year-end accounts demand a lot of information.
Also sometimes called a statement of financial position, a balance sheet lays out everything the company owns and owes. In other words, its assets as made up by contrasting liabilities (the money the business entity owes to others) and the owners’ equity (everything left over for them once liabilities have been subtracted).
The balance sheet conveys the ‘book value’ of a company, providing a snapshot of its financial health. With other documents such as cash flow statements to support it, it makes up the clearest indicator of how a company is performing.
This can be more complex than the simple sum-up it might seem. Assets must be considered for their different forms, such as current assets like existing cash and inventory (including goods still being produced) and non-current assets both tangible (machines, computers) and intangible (intellectual property, patents).
Profit and loss (P&L) account
The profit and loss account goes hand-in-hand with the balance sheet. As the name suggests, it outlines the profits that the company has made through revenue and cost cutting against losses made through matters like expenses. It includes:
- Revenue during the accounting period, both through business activity and by other means
- Gross profit, which is the business’s net revenue minus cost of sales
- Operating expenses including salaries, utility payments, and depreciation of assets
- Net profit, the ‘true’ profit found after deducting expenses
The P&L account gives companies a reference for where to aim their budgets and how to manage their resources.
Notes of the accounts are essential to fully understand the process of calculating and logging the information enclosed in the accounts.
The notes explain the basis of how cash has been accounted, how depreciation of certain assets might have been calculated, and general information about the business entity that lends context to the accounts.
The directors’ report is a requirement designed to encourage greater transparency from companies. It should include the name of all company directors as well as:
- The director’s overview of the company’s financial health and trading activity
- How profitable the company is and where its future growth lies
- Any events that have or could affect the company finances
- The main function of the company
- Recommendations for dividends
The information in your year-end accounts must be recorded to a satisfactory level that meets either International Financial Reporting Standards (IFRS) or New UK Generally Accepted Accounting Practice (UK GAAP).
You can guarantee adherence to these guidelines by using a chartered accountant to prepare your statutory accounts.
How to prepare for year-end accounts
Diligent bookkeeping and regular accounts will go a long way towards gathering all the required information for your year-end accounts.
Rather than scrambling last minute to comb back through the year and gather the information as needed, it’s better to collate it throughout the financial year so that most if not all of it is ready for wrapping up at the end.
Bookkeeping by a skilled accountant will ensure that loose ends are tied up and that the information informing your returns is tidy, straightforward, and organised.
Management accounts are a huge boon to year-end accounts as they are carried out more frequently throughout the year. This means that when the time comes to file the annual statutory accounts, you have at least some existing snapshots of the business’s financial health and activity.
Ultimately, the best way to preparing year-end accounts a hassle-free process is to hire an accountant who is on hand throughout the year. After familiarising themselves with your company’s financial activity, they’re in the best possible place to produce your accounts swiftly and with proper context that will keep Companies House happy.
Chartered accountants for year-end accounts
Venn Accounts combine chartered accountancy knowledge and best practice with an innovative cloud-based software approach. This puts our team in the best possible position to keep your finances running smoothly whilst offering the most streamlined and cost-effective service possible.
To learn more about how we make year end accounts easy, contact Venn Accounts today. We are here to help and are happy to answer any questions you might have.