Statutory Accounts prepared for Limited Companies in the UK must be fully compliant with IFRS (International Financial Reporting Standards) or the UK GAAP (Generally Accepted Accounting Practice). These will typically include the following;
Profit & Loss (P&L) Account
Profit & Loss (P&L) shows the performance of a business in a given period of time. It would typically show a summary of Income received and types of expenses incurred.
However, every business is unique, a retail business for example with multiple stores may want to see Income & Expenses split by each store, whereas a construction business may want to see profitability of each project it undertakes.
P&L produced for management should therefore be tailor made keeping in mind the nature of business, the level of granularity required, the frequency and the layout.
Balance Sheet
A Balance Sheet shows the financial position of a business at any given point in time. A Balance Sheets should be prepared with notes to help indicate key business ratios, such as liquidity ratios, debtor days, inventory days etc to highlights areas of risk and better plan for cashflow.
Key Performance Indicators (KPI’s)
Notes to the accounts shed light on key pieces of information that would be useful to any stakeholder of the business. Typical examples of these would include things like;
- Breakdown of Fixed Assets to show amounts purchased, sold and depreciated
- Related Party Transaction during the year
- Detail of some of its creditor or debtors e.g. money owed broken between the bank, taxman or a director
Directors Report
Companies Act 2006 requires all larger companies to produce a Directors Report in their Annual accounts to improve corporate transparency. It talks about the business’s principal activities, any significant events that incurred during the year and its business impact.
The report is an opportunity to provide greater detail to its readers about how the business performed during the year, any regulation impacts or change in economic outlook. It may also talk about dividends the business intends to pay.
Auditors Report
Auditors Report is only required for Companies carrying out an Audit (whether Compulsory or Voluntary Audit). An Auditors Report is provided by the Company’s auditors, with their opinion on whether the Accounts show a true reflection of the business.