Harney & Co - Preparing Annual Accounts

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Harney & Co.Accountants, Audit, Taxation & Business Consultancy helping Dorset Businesses ranging across Poole, Bournemouth, Wimborne.

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Preparing Annual Accounts

This Guide is aimed at smaller limited companies. At present, those with an annual turnover below £6.5 million and Balance Sheet total no more than £3.26 million must file a set of accounts each year, both with the Inland Revenue and with Companies House, but a full audit is not required.

Accounting records

There is a legal requirement to keep detailed accounting records for the company. The exact requirements will depend on the size and complexity of the business.

For the very smallest business, the absolute minimum accounting records would be an Analysed cash book, splitting all payments and receipts into separate columns for each type of expense or income.

Planning

Planning the work for your annual accounts may involve a us to meet, or it may only need a telephone call. Everyone needs to be clear about who is responsible for doing what and when.

How much of the accounting work will you do yourself?
If you use a manual accounting system, all the basic arithmetical work should be done by the book-keeper. Every column of figures should add up correctly and tally with all the invoices, cheque books, bills and paying-in books. Most importantly, everything should tally with the bank statements.
A good computerised system can do all these things automatically. Depending on your company's accounting expertise you may be able to produce a trial balance. This lists the totals of the credit entries and the debit entries in the accounts, and shows that they agree.
Ask whether there are any tax planning steps you should take before the year end. For example, you may be advised to bring forward certain purchases, so that they count in the current accounting period.
Ask what other information and 'schedules' the we will need. These are likely to fall into four key areas:

Purchases and sales
Stock
Fixed assets
Employees

Book a date in the diary for a feedback meeting with us.

Purchases and sales

Your accounting records should be clear and logical. This saves time for everyone involved.

Cross-referencing means that any one transaction leaves a trail that can be traced right through the records.

List sales made before the year end, but not yet paid for, as outstanding debtors. Include the amount, the invoice number and the invoice date.

Note any invoices that you suspect may not be paid, with a brief explanation. The accountant may make a 'provision for bad debts'. This effectively cancels the sale in your accounts.

List purchases made before the year end, but not yet paid for, as outstanding creditors. Include the amount, the supplier's name and the date payment is due.

Note any invoices you dispute and do not expect to pay, with a brief explanation.
As general good practice, it is always best to list and analyse your debtors and creditors by date (an 'aged' list). It is then immediately apparent where problems may arise, such as bad debts.

Stock

The value of stock is a key element in retail and manufacturing businesses. It includes work-in-progress. Service businesses (e.g. management consultants) have little physical stock, but may have considerable 'work-in-progress', such as half-finished projects.

Unless stocks are a minor item in your accounts, you will need to carry out a stock take. This is a physical count-up of the goods on your premises. It is made easier and faster with careful planning.