Company Accounts

Adequate accounting records must be kept. The records must be sufficient to explain the company's transactions and to disclose with reasonable accuracy at any time the financial position of the company and enable a profit and loss account and balance sheet to be prepared. In particular, the accounting records must contain entries from day to day of all money received and expended with details of transactions, and a record of assets and liabilities. The directors must present the company's Report and Accounts to its Annual General Meeting each year, except where "elective" resolutions have been passed to exempt the company from doing this. The directors are also required to deliver the Report and Accounts to the Registrar of Companies within the time period permitted, although a company does not have to file an auditors report where its turnover is less than £350,000 or a balance sheet where the turnover total is less than £1.4 million. Failure to comply renders the directors liable to a fine.The period allowed for delivering the Report and Accounts to Companies House is currently 10 months after the financial year-end, for a private company. Where it has interests outside the UK, the directors can give notice to the Registrar and claim a further three-month extension. A public company currently has 7 months from the financial year-end to deliver its Report and Accounts to the Registrar.

Medium and Small Sized Companies

A company qualifies, under the Companies Act, as medium or small sized, where it meets specified criteria over a period of time. A company has to comply with at least two of the following criteria concerning annual turnover, balance sheet totals and the average weekly number of employees:

Form and Content

The Companies Act establishes the general rules in relation to the form and content of the company's accounts. It requires that one of the prescribed formats (four for the profit and loss account and two for the balance sheet) should be used and adhered to year on year, unless there are special reasons justifying a change, although some flexibility is allowed. Comparative figures for the previous accounting period must be shown and individual items may not be set off against each other.

Small Company Exemptions

"Small" companies need only file an abbreviated balance sheet that complies with the Companies Act. This means that certain items can be aggregated under each of the main balance sheet headings, though the aggregate amounts of debtors and creditors have to be divided between amounts receivable and payable within one-year and those receivable or payable beyond that period.

Small companies may also present to shareholders a full profit and loss account together with an abbreviated balance sheet.

Notes to the financial statements

Information that cannot be accommodated in the model formats has to be disclosed in notes to the financial statements. These notes may be contained in the accounts themselves or in a separate document annexed to the accounts.

By way of general note, the accounting policies used by a company must be disclosed, in particular indicating the depreciation and foreign currency translation methods employed (as appropriate). There must also be a statement that the accounts have been prepared in accordance with applicable accounting standards.

The following details must be disclosed by way of notes to the balance sheet:
(a) Share Capital and Loan Stock;
(b) Reserves and Provisions;
(c) Fixed Assets;
(d) Investments;
(e) Creditors;
(f) Financial Commitments;
(g) Loans for Purchase of Company Shares;
(h) Credit Transactions with the Directors.

The following details must be disclosed by way of notes to the profit and loss account:
(a) Segmental Analysis:

• Trade;
• Geographical Market;

(b) Extraordinary Items;
(c) Taxation;
(d) Specific charges against income;
(e) Employees and their remuneration.