What is a Statutory Account?
As a small or medium-sized business, you can decide on how to file your accounts. You can complete a full set of accounts, known as annual accounts or statutory accounts. You can also choose to submit an abridged set, which is less detailed but still abides by the HMRC and Companies House’ compliance requirements. If you’d like to be more thorough with your accounts, you may want to hire accountants in Hillingdon to guide you with your statutory accounts, which are a crucial part of running your business.
Submitting statutory accounts allows your shareholders to observe your company’s performance while keeping your records updated with Companies House. When submitting statutory accounts, you need to include a balance sheet, cash flow statement, a profit and a loss account, notes to the accounts, and a directors’ report. Here’s what you need to know about statutory accounts:
The Components of a Statutory Account
A statutory account has many different components that you need to complete with the help of accountancy services. They are the following:
- Company Information Page
This page is very brief, as it contains your company name, registered number, your registered office’s address, and the names of your accountant and directors.
- The Balance Sheet
The balance sheet lists the value of everything your business owns, its debt, and what you must pay until the last day of the financial year to be included by this set of accounts. It covers numbers for the reporting year and previous year along with explanatory notes to provide more context. The items to include in the balance sheet are assets (fixed, tangible, current, total current, net, among others), stocks, debtors, cash at the bank and on hand, capital and reserves, shareholders’ funds, and others. A director must sign the balance sheet and include a statement that the board approved it.
Be sure to work with accountancy services when preparing your balance sheet, as it guarantees accuracy while highlighting potential problem areas you must address during the next reporting period.
- Profit and Loss Account
This document displays your profits by subtracting your costs from the sum of your sales. It lays out your business’ turnover, gross profit, operating profit, cost of sales, tax on ordinary activities, profit on these activities before taxation, and profit for the financial year.
It helps to pay special attention to the pre-tax profit, as it’s the most critical part of this section. You can explain the depreciation, interest, tax, fixed assets and amortisation value, and intangible assets in the notes to the accounts.
- Cash Flow Statement
The cash flow statement is an essential part of larger companies’ statutory accounts and is optional for small companies, as they are exempt. Still, you can use it as a valuable tool for your business since it demonstrates money’s movement in and out of your company. It often involves money from returns on investment, tax charges, operating activities, capital spending, and dividends paid. It’s an excellent way of seeing your company’s spending habits, allowing you to determine opportunities for saving and where you can afford to invest more.
- Notes to the Accounts
This section allows you to explain the balance sheet or profit and loss account further by providing more detail and context to the figures. It must contain a statement of the accounting principles you use and describe the basis of preparation and how you used to display turnover and depreciation. You can use this section to add numbers to certain figures in the balance sheet, allowing you to explain if the company owes money to a bank, another company, or taxes.
- Directors’ Report
In this section of the report, you’ll be detailing your business’ main activities, your company’s prospects and performance, along with the details of dividends you’ll be paying your shareholders. The report enumerates the names of directors for that reporting year, along with a summary of their responsibilities. You can use this section to reflect on the past year and explain your financial performance and circumstances, along with other events that have impacted the balance sheet. A director must sign this report and include a statement that the board approved it.
A statutory account allows your business to take a good look at your financial position and reevaluate how to approach your expenditures. While you don’t need to file a complete set to Companies House if you are a small business, you’ll still need to send a full version to your shareholders and HMRC along with your company tax return. Since they tend to be complicated and time-consuming, you must work with accounting professionals to avoid costly mistakes and ensure accurate reporting.
If you need professional help to sort out your personal tax affairs, let us know at 1to1 Accountants! We are an accountancy firm that helps small businesses, limited companies, partnerships, sole traders, and freelancers with all their accounting needs. Schedule a free consultation with us today!