Financial year end and reporting requirements

At the end of each financial year, your ‘books’ will be used by an accountant or bookkeeper to prepare an end-of-year summary of your accounts, often known as the financial statements.  If your business is an LLP or a Limited Company, you’ll have to file a copy of your financial statements at Companies House, and the financial statements may need to be audited.

Many businesses do not need to have their accounts audited – for example sole traders and partnerships as well as small LLPs and limited companies (providing they have taken the necessary steps).  A solicitor or an accountant will be able to advise you what the reporting obligations are for your particular business, what date is best to pick for your financial year end - and whether or not you need an audit.  If your business is a small limited company or LLP they will also be able to help you decide whether or not you should opt out of annual audits, and how to pass the necessary resolutions of the company to opt out.

Financial statements

Your accountant or bookkeeper can use your financial records to produce financial statements if required.  These are formal reports which summarise the business’s income and expenditure and its assets and liabilities. 

The way that they are set out is defined by law (the Companies Act 2006 etc) and regulation (United Kingdom Generally Accepted Accounting Standards – or UKGAAP).  The financial statements will include a statement about your income and expenditure (in most cases called ‘profit and loss’ or ‘P&L’); the balance sheet which summarises assets (such as office furniture, factory equipment and cash) and liabilities (like bank loans and suppliers you owe at the date of the year end); a cashflow statement which explains movements in income and expenditure; and reports from the board of directors (or partners) and from the auditors, if they have been audited.  There are also notes which cover a variety of subjects – like how depreciation is calculated, the estimated tax liability for the year, information about how much employees and directors cost the company and the value of the company’s fixed assets.