Preparing For Your Annual Accounts
Neil Bromage has run his own small business and is a freelance business writer working on a range of newspapers including The Times, Sunday Times, Telegraph and Financial Mail on Sunday. This book is based on a wide range of columns and Q&As written and answered by Neil for Business Link over a number of years. He is based near Preston, Lancs.
If you get a sinking feeling at the mere thought of sorting out your annual accounts don’t worry, you are not alone. And although it may not always feel like it at the time, getting ready for your annual accounts can be a very useful exercise.
Even if your business isn’t required by law to have audited accounts either you or your accountant will still have to prepare accounts for taxation purposes. If your business is a limited company it has to prepare accounts each year and send them to the Inland Revenue, Companies House and its shareholders. This enables anyone who has dealings with the company to obtain sufficient information to make informed judgments on its financial position.
If, on the other hand, you are self-employed or belong to a partnership, you are still required to prepare a set of accounts for taxation purposes. The only exceptions are for very small businesses with turnover of less than £ 15,000, which can submit simplified ‘three-line accounts’. Even then the Inland Revenue may still ask for further information.
Getting the information is not difficult – as long as your books are up to date – though the exercise will be much easier if you have been using a computerised accounting package. Try to find a quiet time of year and be prepared to think carefully about some aspects of your business, particularly the reliability of debtors and the valuation of stocks. Though, for instance, a service business may carry little in the way of physical stock it may have a number of half-finished projects. These will be classed as work in progress and treated as stock for accounting purposes.