The directors are responsible for preparing accounts for each financial year. The first accounts of a company cover the period starting the date of incorporation till the last day of the anniversary month. For example the accounts of a company incorporated on 08 Jan 2010 will have its first accounting period from 08 Jan 2010 to 31 Jan 2010. Annual reports of small companies include the following:
- A directors’ report
- a profit and loss account (or income and expenditure account if the company is not trading for profit);
- a balance sheet signed, and
- the Notes to the Accounts
The Balance Sheet of a company must be signed off by a director whilst the director’s report could be signed off either by a director or a secretary. Private companies are no more statutorily required to have a company secretary though. A copy of the annual accounts must be sent for each financial year to a) every member of the company, b) every holder of the company’s debentures and c) every person who is entitled to receive notice of general meetings. Small companies could be either private or public companies. Whilst public companies must lay their accounts before their members at an annual general meeting private companies are exempted from this requirement. All companies are required to have their accounts filed at the Companies House within 9 months for a private company (or 6 months for a public company) after the accounting reference date.
Small companies are defined to mean those meeting at least two of the following conditions:
- annual turnover must be not more than £6.5 million;
- the balance sheet total must be not more than £3.26 million;
- the average number of employees must be not more than 50.
Small companies are not required to have their accounts audited unless otherwise required by other laws; for example those regulated by the FSA. Small companies seeking exemption from audit must include the following statements on the face of the Balance Sheet above the director’s signature:
Audit Exemption Statement
For the year ending ………………(dd/mm/yyyy) the company was entitled to exemption from audit under section 477 of the Companies Act 2006 relating to small companies.
Directors’ responsibilities:
· the members have not required the company to obtain an audit of its accounts for the year in question in accordance with section 476,
· the directors acknowledge their responsibilities for complying with the requirements of the Act with respect to accounting records and the preparation of accounts
· these accounts have been prepared in accordance with the provisions applicable to companies subject to the small companies’ regime.
