Make limited company accounts preparation easy: Follow these tips

Banner image- Make limited company accounts preparation easy: Follow these tips
As the owner of a limited company, there are certain laws you must follow regarding your books of accounts. And in theory, it is perfectly possible to handle those books yourself as long as you are aware of the laws and the relevant deadlines.
However, in practice, it is almost always easier and more worthwhile to have an accountant taking care of limited company accounts preparation. We will talk about why in a bit, but first, let us get into some of the core questions around limited company accounts. 

What are annual accounts?

The annual accounts show a limited company’s financial activity over a specific period (usually 12 months), including details about operational performance, transactions and where the company stands financially at the end of the period. Annual accounts are also known as statutory accounts, financial statements or company accounts.

What does the preparation of annual accounts entail?

Annual accounts comprise a balance sheet, a profit and loss statement, a director’s report and supporting notes about all these documents. In other words, limited company accounts preparation requires complete data about the company’s incomes, expenses, assets and liabilities.

Do you need an accountant to submit limited company accounts?

Legally, no. As the company director, you can prepare and submit all the annual accounts on your own if you want. However, given that it is a complex process and that there are multiple laws and deadlines to adhere to, it is advisable to let a professional accountant handle limited company accounts preparation.

To whom do I submit my annual accounts?

Your annual accounts need to be handed over to HMRC, Companies House, your company guarantors and shareholders and anyone entitled to attend company general meetings.

Which accounting records your limited company must keep?

Every limited company must maintain the following records for at least six years from the end of the financial period to which they belong:
  • Bank statements
  • Lease agreements
  • Income and expense records
  • Loan agreements and mortgages
  • Data on assets and liabilities
  • Goods and services bought and sold
  • Details of money owed to the company

Full statutory accounts vs abridged or abbreviated accounts?

Not all companies need to submit full company accounts. If you are a micro-entity or a small limited company, you can submit a simpler version known as abbreviated accounts. The profit and loss statement is optional in this case – only a balance sheet and fewer notes are added. The criteria for identifying as a micro-entity include the following:
  • The average number of employees is a maximum of 10
  • Balance sheet total a maximum of £316,000
  • Turnover a maximum of £632,000
The criteria for identifying as a small limited company include the following:
  • The average number of employees is a maximum of 50
  • Balance sheet total a maximum of £5.1 million
  • Turnover a maximum of £10.2 million 

It is also important to state here that dormant companies must prepare and file company accounts the same way active companies have to. And now for the most crucial bit regarding limited company accounts preparation.

Do you need an accountant to prepare your annual accounts?

It is tempting to put ‘hiring an accountant’ at the bottom of your priority list. “It is a small company; I can do it myself and save some money,” you might think. Wrong!
Even if you are thoroughly up to speed with accounting laws, the time you devote to reconciling your transactions, filing taxes, filing statements with Companies House and studying your P&L statement far outweighs any cost savings you make by not hiring an accountant.
And if that is not reason enough, let us talk about some of the other advantages of limited company accounts preparation: 

1. Accounts submitted accurately and on time

There are multiple rules and deadlines to track regarding your balance sheet and P&L statement. In addition, you need to submit a confirmation statement and a Self Assessment tax return as a company director. An accountant can do all this faster and much more accurately than you can as a busy director. It is a major headache off your plate.

2. Business strategy advice

Accountants can help you run your business better too! As financial experts who know all the ins and outs of where the company stands, they can give you valuable pointers on how to manage your cash flow, which seasonal trends to watch out for, which opportunities to invest in and so on.

3. Legal scrutiny avoided

Any mistakes in your company accounts could lead to unwanted attention from HMRC, which will involve tedious explanations at best and legal action at worst. With an accountant like us handling the accounts, you avoid any such slip-ups, even accidental ones. And even if the HMRC does a routine Tax Compliance Check on you (as they well might), you come out with flying colours.

4. Greater tax efficiency

No one likes paying taxes. But there is a legal way to reduce your tax burden, and then there is an illegal way. With an accountant on your team, you get smart suggestions on relief programs to apply to and tax benefits that your limited company is eligible for. Not only do you save money on this year’s bill, but you also get clever ideas on how to run your finances more efficiently going forward.

5. Focus on the business

You may know the rules of accounting, but the fact remains that preparing and submitting company accounts is a tedious job that eats into your time as the company owner. An accountant can prepare those accounts much faster and more accurately than you can because that is what they do best! And by having one on your team, you get to do what you do best – run your business.

6. Advice on finance

Many small limited companies need help identifying the best source of money for their activities. An accountant can assess your company’s health and put together a list of best options, be it equity, loans, crowdfunding or something else entirely. That way, you don’t risk taking on liabilities you cannot meet later.

Over to you

Hopefully, you are convinced by now of the importance of hiring an accountant for your limited company. It is a reliable, hassle-free way of ensuring that your finances are always in order – and your investment in hiring a top accountant will be repaid many times over. Make limited company accounts preparation a breeze. Hire Golding Accountants today!

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