Some small and medium sized private companies (limited companies) are allowed to produce their annual accounts, for filing with the registrar at Companies House, in a much-reduced format known as ‘abbreviated accounts’. For this article we will only cover small business accounts, and not medium size companies.
The purpose of abbreviated accounts is a mixture of cost, time and resource. You may still want an accountant to prepare your final accounts, but the formal reporting procedure is cut by 75%, this should result in a smaller year end bill.
Further, as the accounts are basic and you were to keep your own day to day records you are not that far off completing the whole process yourself (especially if you have a bookkeeper).
The ‘other’ reason for using abbreviated accounts is to keep as much information away from others as possible. A good example - you may not want to let someone, say a customer, know how small you are, and what your financial make up is. When you are a small and growing company having every pound (£) you earn and spend reported in full can damage your future prospects, it’s sometimes better that others know nothing about your financial plight (there are of course pro’s and con’s to this statement). A bad example - to dumbfound the Inland Revenue.
An Example of a Profit & Loss Account and Balance Sheet:
START OF ACCOUNTS Company Registration No. 3214567
SMALL BUSINESS LIMITED
Abbreviated Accounts for the year ended 31st December 2002
PROFIT & LOSS
Year End 31/12/02
Year End 31/12/01
Income
Sales
80,000
80,000
60,000
60,000
Expenses
Wages
30,000
25,000
Advertising
4,000
3,000
Professional Fees
250
200
Telephone
450
300
Stationary / Post
175
34,875
125
28,625
Operating Surplus (Loss in brackets)
45,125
31,375
BALANCE SHEET
Year End 31/12/02
Year End 31/12/01
ASSETS
Fixed Assets (see note 1)
40,000
25,000
25,000
Current Assets
Debtors
12,000
3,000
Cash at Bank
1,250
53,250
800
3,800
Current Liabilities
Creditors:
Amount falling due within 1 year
(9,000)
(5,000)
Total Assets less Current Liabilities
44,250
23,800
Financed by:
Capital and Reserve
44,250
28,800
Notes
1. Machinery & Lorry
These accounts are prepared in accordance with the special provisions of Part VII of the Companies Act 1985 relating to small companies.
The directors state: (a) for the year ended 2002 the Company was entitled to exemption under Section 249A(1) of the Companies Act.
(b) No notice from members requiring an audit has been deposited under Section 249B(2) of the Companies Act 1985
(c) The directors acknowledge their responsibilities for:-
i. ensuring the Company keeps accounting records which comply with Section 221 of the Act, and
ii. preparing accounts which give a true and fair view of the state of affairs of the Company as at the end of the financial year, and of its profit or loss for the financial year, in accordance with the requirements of section 226, and which otherwise comply with the requirements of the Companies Act relating to accounts, so far as applicable to the company:
(d) The accounts have been prepared in accordance with the special provisions in part VII of the Companies Act 1985 relating to small companies
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