AB Accountants & Consultancy

Statutory Accounts

The balance sheet is a snapshot of your company’s financial position at a specific point in time and must show the assets, liabilities, and equity of the company. The balance sheet should show your company’s assets in order of their liquidity, so that the most liquid assets are shown first, such as cash and short-term investments. The profit and loss account, also known as the income statement, shows your company’s revenue and expenses over a specific period, usually one financial year. It provides information on the company’s operating performance and helps to determine the company’s net profit or loss for the period.

The cashflow statement provides information on the inflows and outflows of cash and cash equivalents during the period and helps to give a clearer picture of the company’s financial health. The notes to the accounts provide further detail and explanation about items in the balance sheet, profit and loss account and cashflow statement. This includes information on accounting policies and estimates, as well as details on significant transactions and events that have taken place during the year. The directors’ report provides an overview of the company’s business and its performance during the year, and should include information on the company’s strategy, risks, and future prospects.

Overall, the statutory accounts are an important tool for your company’s stakeholders, including shareholders, creditors, and regulators, to assess the financial performance and health of your business. It is important to ensure that your statutory accounts are accurate and comply with the relevant regulations, as failure to do so can result in penalties and reputational damage.

Details Required for Statutory Accounts:

The Statutory accounts includes company name and registered number, the address of your registered office and the names of the directors and the accountant.

Directors’ Report:

The directors’ report includes information on the company’s compliance with legal and regulatory requirements, any risks and uncertainties that the company faces, and a statement on the company’s corporate governance practices. It should also provide information on the company’s health and safety policies, environmental policies, and any social responsibility initiatives the company is involved in.

It is important for the directors’ report to be transparent, comprehensive, and accurate, as it helps shareholders and stakeholders to understand the performance and direction of the company. The report should also be consistent with the financial statements, providing further context and insight into the financial results.

In conclusion, the directors’ report is a crucial part of the company’s annual report and should provide valuable information to stakeholders about the company’s activities, performance, and prospects. It should be written in a clear and concise manner and provide a fair and accurate representation of the company’s position.

The Balance Sheet:

A balance sheet shows the value of everything that your business owns and what it owes as well, as what is due to be paid up to the last day of the financial year covered by this set of accounts.

It includes figures for the reporting year and the previous year, with a numbered reference to any explanatory notes that appear in the Notes page. The main items to include are:

The balance sheet should be signed by a director, with a statement that it has been approved by the board. When you or your shareholders review the figures in your accounts, the main numbers to watch are those that show how much cash is available in the business. Look out for trade debtors, the amount owed to the company by your customers, as well as trade creditors, which is the amount you owe to your suppliers. If your customers owe you large amounts, this weakens your cash position so you should aim to impose tighter payment terms. Similarly, you should aim to get the most favourable terms from your suppliers.

Look at short- or long-term debt and the value or status of any loans. On the balance sheet, debt is split between current creditors, money owed within 12 months, and longer-term borrowings, such as commercial loans or any repayable government grants or loans taken out during the pandemic. Loan or grant repayments fall into categories on the balance sheet. For a five-year loan, for example, payments due in the next 12 months are categorised as current creditors; the balance will be shown under longer-term debt. If you have a number of loans to repay, you may not have much spare cash, depending on the time available to pay back.

Additionally, you should also keep an eye on the net assets figure, which is the total value of your business’s assets minus its liabilities. If this number is positive, it means that your business has positive net worth, which is a good sign. However, if this number is negative, it means that your business has a negative net worth, which is a cause for concern. It’s also important to monitor the profit and loss account, which shows your business’s revenue and expenses for a specific period. Look for any trends or patterns in your revenue and expenses and consider any factors that may have caused any significant changes. Overall, understanding the key numbers in your statutory accounts is critical to managing your business effectively. By keeping an eye on these key figures, you can make informed decisions about your business’s financial health and ensure that it stays on track for success.

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