What should you address when preparing your annual accounts?
I think most people will agree that the most daunting part to owning a business is preparing your annual accounts. Yet this doesn’t have to be as scary as you think.
Address the following 8 areas for instance, and you can ensure that you have all the information you need to get your accounts in on time.
- Recognising your Legal Requirements – as a business owner there are certain things you are legally responsible for, including: the accuracy of your accounts and submitting them on time (this has to be done within 9 months of your company’s year end). Without this information (and your corporation tax return) the HMRC cannot determine the amount of taxes you have to pay.
- What do your Financial Statements consist of– any financial information you supply in your annual accounts is referred to as financial statements. This can be split into 4 sections:- an overview by you the business owner
– a balance sheet outlining the financial position of your business at the end of your financial year
– a profit and loss account showing your trading performance over the year
– notes on any tax provisions you may have made
- Managing your Accounting Records – if your business is relatively small, then the minimal amount of records you should be keeping are: bank statements, cheque books and paying-in books; any original invoices; PAYE records; VAT records; stock or uncompleted work at the end of the year and a list of fixed assets.
- Record of your Purchases and Sales– this doesn’t have to be complicated although it is important that you set these out clearly and logically and that you cross reference them.Take the following examples:
– all sales made before the year end – if they haven’t yet been paid for, list them as ‘outstanding debtors’ and include the following information: the amount, invoice number and date
– purchases made before year end – if these haven’t been paid for yet, list them as ‘outstanding creditors’ and again include the amount owed, suppliers name and when the payment is due.
- Dealing with Stock and uncompleted work– you need to be careful here as there is the potential for error if you’re not careful. That is why if a purchase has arrived at your warehouse, but without an invoice, the cost is included in the accounts.Similarly if you have sold and invoiced an item but have not yet delivered it, you need to exclude these goods from the valuation of your stock. And so on and so forth.
- Fixed assets – it is important that you keep a ‘fixed assets register’ of all the assets you own. Simply break them down into the various types of assets you own, when you purchased them, how much you paid, and give a description of the item and its location (Note: remember to give your accountant a copy of all your purchases and sales invoices).
- Dealing with Employees – you are liable, not your employee, if tax and NI is deducted incorrectly. For this reason it is important to keep records of all payroll and expense claims, so you can complete a P11D form.
- Take note of key dates – it is important that you are aware of all the relevant tax dates which can affect your business. By marking them off on your calendar you can ensure your accounts are always sent off on time and that you don’t get penalties for submitting them late.
As you can see, preparing your annual accounts doesn’t have to be daunting; however if you need help preparing them then a business accountant can help.
With their support they can help you to collate and manage all your records, invoices and assets, and ensure you send the correct information to the HMRC on time.
So if the task of doing your annual accounts is getting you down or you need more advice on what to send and when, why not hire a clever business accountant to help?