Year End Accounts Checklist for Limited Companies

Year-end accounts are a critical component of running a limited company.

They provide a comprehensive overview of the overall financial health of the company, as well as ensuring transparency. Crucially, they’re required to ensure companies meet their statutory obligations.

Understanding what’s required for end-of-year accounts, how they’re prepared, what they should include, and when they should be submitted, is essential.

How to prepare year-end accounts for limited companies

Year-end accounts need to be carefully prepared to ensure that they’re correct.

Errors can be time-consuming, as well as potentially costly, to put right. There are several steps that must be taken to ensure that end-of-year accounts are prepared correctly.

Here is a step-by-step guide to preparing your year-end accounts:

Gather financial records

Before you can begin preparing end-of-year accounts you will need to gather any relevant financial records for the accounting period in question.

This will typically include:

Sales invoices
Purchase receipts
Bank statements
Payroll records
Expense receipts

Keeping records, receipts, and any relevant documentation throughout the year in good order makes this stage of the process simpler.

Reconcile accounts

A key stage in preparing end-of-year accounts is reconciliation.

This involves matching the transactions recorded in your financial records with the corresponding bank statements.

This ensures that all of your income and expenditures are recorded accurately.

Categorise transactions

All transactions should be sorted into appropriate categories such as sales, purchases, payroll, and operating expenses.

These categorisations help you understand the financial performance of different aspects of your business.

Accruals and prepayments

Accruals are expenses that have already been incurred but have not yet been paid.

Prepayments are expenses that are paid in advance.

Accruals and prepayments may need to be adjusted to reflect the true financial position of the company.

Asset depreciation

The depreciation of fixed assets due to wear and tear across the accounting period needs to be accounted for.

This ensures that asset values are accurately represented in financial statements.

Prepare financial statements

Key financial statements will need to be prepared.

These include:

Profits and loss statement: Your company’s income and expenses should be summarised. This should show the net profit or loss of the company over the accounting period.

Balance sheet: The balance sheet provides a yearly snapshot of the company’s overall financial position. This should include assets, liability, and any equity.

Cash flow statement: This details cash inflows and outflows, highlighting the overall liquidity of the business.

Review and verify

The financial statements should be reviewed to ensure that they’re accurate and complete.

You should also verify that all figures are correct, with the statements complying with the relevant legal requirements as well as accounting standards.

Submit to Companies House and HM Revenue & Customs (HMRC)

Once the accounts have been prepared and verified, they should be submitted to Companies House and HMRC. It’s important to ensure that submission deadlines are met to avoid potential penalties.

What is included in year-end accounts?

The year-end accounts of limited companies provide a detailed picture of its financial performance and current positions.

Typically, they will include:

Profit and loss account

The Profits and Loss (P&L) account, sometimes known as the income statement, provides a summary of revenues and expenses over the accounting period.

This provides a quick, easy-to-reference guide to the value of the profit or loss that the company made.

Balance sheet

The financial position of the company at the end of the accounting period is presented on the balance sheet.

This will include assets, liabilities, and equity held by shareholders.

The assets are divided into current (e.g. cash, inventory), and non-current (e.g. property, equipment). Liabilities are further categorised into current, such as accounts payable, and long-term, such as loans. Equity is the investment that shareholders have made into the company.

Cash flow statement

The cash flow statement provides details of all cash inflows and outflows into the business during the accounting period.

It’s divided into operating activities, investing activities, and financing activities.

The cash flow statement provides a more detailed picture of the overall liquidity position, as well as the cash management of the company.

Directors’ report

The directors’ report provides insight and an overview of the company’s performance.

Typically, this will include significant events, plans, and outlooks. It also incorporates information about the company’s principal activities, a business review, and corporate governance.

Notes to the accounts

This section provides additional information, as well as explanations of the figures presented in the financial statements.

These will usually include details about accounting policies, contingent liabilities, and breakdowns of specific items.

Auditors’ report (if applicable)

If the company is required to undergo an audit, the auditor’s report will need to be included in the year-end accounts.

This gives an independent opinion of the accuracy of the financial statements.

Year-end accounts checklist for small businesses

End-of-year accounts can seem daunting, particularly for small businesses.

It’s important to take a careful and systematic approach to ensure that everything that’s required is included.

Here’s a checklist to make sure that your company meets its taxation and compliance obligations at the accounting year-end:

Review your financial records

All sale and purchase invoices should be recorded
All bank statements should be reconciled with income and expenses
Check that all of your expense receipts are accounted for

Update your accounts

Record any outstanding invoices and bills
Adjust your accounts for any prepayments or accruals
All payroll records should be accurate and up to date

Asset management

The company’s fixed asset register should be updated
Calculate and record any depreciation in asset value

Inventory management

A physical inventory count should be conducted, with records adjusted to reflect actual stock levels

Verify debtors and creditors

Accounts receivable should be reviewed and any bad debts should be written off
Accounts payable should be reviewed and confirmed ensuring that all liabilities are recorded

Prepare financial statements

Compile the Profit & Loss account
Prepare the balance sheet
Complete an accurate cash flow statement

Review and adjust

Draft financial statements should be reviewed for accuracy
Make any necessary adjustments

Compliance and submission

Prepare the directors’ report
Compile notes to the accounts
Include the auditor’s report if applicable
Submit the year-end accounts to Companies House and HMRC by the due dates

Can I submit my own year-end accounts?

It’s certainly possible to submit your own year-end accounts, particularly if your business has a small turnover and your financial activities are straightforward.

However, it does require a solid understanding of statutory requirements as well as accounting principles.

By preparing and submitting your own accounts, you may save on professional fees while maintaining direct control over the financial information and submission process.

However, it’s important to remember that preparing accurate, fully compliant year-end accounts can be complex as well as time-consuming.

It can be a particularly difficult exercise if you don’t have accounting knowledge or experience. Mistakes in the accounts or submission process can lead to financial penalties, incorrect tax assessments, and potential legal issues.

Not only that, time spent on preparing year-end accounts can divert valuable attention and resources away from other aspects of your business.

Tips for DIY account submission

If you decide to submit your own year-end accounts, what steps should you take to minimise errors and the risk of financial penalties?

Here are some tips to ensure a smooth submission process:

Use accounting software

Accounting software can simplify the process and reduce the risk of errors.

Stay organised

Keep your financial records well-organised throughout the year to make the year-end accounting process smoother.

Educate yourself

Time should be taken to understand the legal and accounting requirements of year-end accounts.

Consider a professional review

A professional review can ensure that your accounts are accurate and that all requirements have been met before they’re submitted. This can ensure that you avoid errors, legal complications, and costly penalties.

Year-end accounting for limited companies made simple

Year-end accounting can be a daunting task, but with a methodical, systematic approach, it can be made easier.

Here are some tips to reduce the risk of errors, and to streamline the process:

Invest in trustworthy accounting software

Good accounting software can automate many of the tasks required for the preparation of year-end accounts.

Software can provide invoicing, expense tracking, bank reconciliation, and financial statement generation.

There’s a range of accounting software options available so be sure to compare different solutions to find the one that is most appropriate for your business needs.

Maintain regular records

Your company’s financial records should be kept up to date throughout the year.

Transactions should be recorded and financial statements should be regularly reviewed.

Accounts should be reconciled to avoid discrepancies. A systematic approach can prevent any last-minute rushes and errors.

Plan ahead

When it comes to year-end accounting, effective forward planning can make all the difference.

Don’t wait until the approach of the end of the financial year to begin preparing your accounts.

Regular time should be set aside each month or quarter to review and update your financial records.

Consider deadlines

Be aware of the key deadlines for submitting your accounts to Companies House and HMRC. Missing these can result in penalties.

Consider professional support

If you find the process too complex or time-consuming, then consider hiring an accountant or taxation expert.

Using the services of professional accountants ensures the accuracy of your year-end accounts, as well as compliance.

This saves you time and reduces the risk of errors.

Regular financial reviews

Regular financial reviews can help you monitor the financial health of your company. These can ensure any issues are identified early giving you a chance to take timely corrective action.

Simplify the process

Financial processes can be streamlined through the standardisation of documents and through the implementation of efficient ways of working. Processes should be developed to make data collection and reporting easier.

Training and education

Consider training courses for yourself and anyone who is involved in the process of preparing year-end accounts. This may include education in the reporting requirements, accounting processes, and how to use accounting software to the greatest effect.

Year-end accounting support for limited companies from DAAFL

At DAAFL, we can take the hassle out of end-of-year accounts.

Our team of financial experts provides a range of services for limited companies, ensuring they meet their statutory obligations, reduce their liabilities, and optimise their financial record keeping.

We produce end-of-year accounts for limited companies, as well as providing expert advice and guidance to support your business objectives.

Our bespoke services meet your unique needs while giving you more time for other business activities.