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October 23rd 2013 / BY: Wisteria

Advice from Business Accountants on basic accounting

After your set up a company, you will be obliged to submit a number of statutory documents to HMRC and Companies House on an annual basis. One of these is the Corporation Tax Return and the other is the company’s accounts which are filed to HMRC and Companies House respectively.

As accounting is one of the two fundamental compliance requirements that every company is obliged to complete annually, it is important to understand what accounts are on a basic level.

The main purpose of accounting is to show:

  1. A company’s financial position
  2. A company’s financial strength.

The first of these is to see how the company is performing and from this, you will be in a better position to see what processes and operations may need tweaking within your company formation to improve the performance.

accounting

The second is to determine the whether the business is profitable and enables you to see whether or not what you have been doing to date has been successful.

This provides valuable information about the company and will be displayed in the form of both a balance sheet and also a profit and loss account.

The balance sheet is a snapshot at one point in time (usually prepared at the year-end date) which translates what the company has in terms of assets (what the company owns) and liabilities (what the company owes) at the specific point in time. This shows the company’s position at that point in time.

The other part is a profit and loss which unlike the balance sheet reports on whether the company has been profitable or not. This includes a company’s total sales/turnover, less the expenses incurred in relation to the business. There are some expenses that require special tax treatment and you should speak to qualified tax advisers for information on these.

Once these have been produced, they are then incorporated into a company’s accounts which are produced in accordance with Generally Accepted Accounting Principles (GAAP) and Companies House’s guidelines and regulations. The accounts for any company formation are required to be produced for the financial year and are to be submitted 9 months after the year end date. One thing to note is that a company’s financial year can exceed 12 months, but cannot exceed 18 months.

If your company has rather simple affairs then it may be possible that you deal with the accounts yourself with the aid of the many accounting software packages that are available online. However, as things become more complicated, it is highly recommended that you look for assistance from business accountants to ensure your company accounts are correct and in order. In addition to this, it would be beneficial for the corporation tax to be computed by tax advisers as they will be able to assist you in terms of planning how best to take advantage of various allowances which may help reduce your overall corporation tax liability.

If you would like more information about how Wisteria can help you to set up a company as well as providing our business accountants services to you, please contact us on 020 8952 0140 or email info@wisteria.co.uk where one of our fully qualified business accountants will be able to discuss your options with you.