A company has to produce and report its financial results. Depending on the size of your company, will depend on where you have to disclose and the style you have to disclose it in. For limited companies, plc's or LLP's will have to lodge their profits to Companies House. Depending on the size of your turnover (not profit) will decide on exactly what data you have to include in these accounts and whether they have to be audited. Companies House is the Government agency that registers, monitors and ensure companies disclose as necessary under the Goveernment regulations.  These regulations only require the limited companies, plc's and more receently LLP's to lodge their accounts there, so if you are a partnership or a sole trader, you are not required to do this. Although partnerships and sole traders do not need to declare thweiir profts to Companies House, you are still required, along with all companies, to report your profit or loss to H M Revenue & Customs. To disclose your profit and loss to the Revenue, as well as the completion of their statutory returns, it can be advisable to [producecreateprepare] simple accounts with a profit and loss account. This can then be sent with your tax return to support any entries on your tax return. Accounts are not simply used for disclosing purposes to comply with current legislation, they can assist in obtaining credit as banks and financial businesses will usually want to look at least three years accounts which includes a profit and loss account. What information is held in a profit and loss account?

If you are out shopping at any time and you use your business account for any purchase (women's perfume, or anything else) then these must not be included the business' financal statements and can not be part of company outlay.

The profit and loss account brings together your business' financial transactions and summarises them into helpful categories which can be reviewed.  They also summarise these to show if a profit or loss  has been made.  They will cover a given time period, your accounting period, which is usually a year but can at times be longer or shorter, such as when you are just starting or ceasing a business. To produce your own profit and loss account, you must divide the account horizontally into two halves with the top half being your money in and the bottom section being your money out.

Your revenue should then be split into two categories, one being turnover and the other being other income. Turnover can also be called business sales as it shows the income which has been received from the sales of your products or services (depending on your business type). How you register this facts will vary depending on the kind and size of your company but you may use a straight forward listing in a ledger, or a computer spreadsheet or a computer software program.

Companies can also receive capital from additional sources like bank interest, sales from assets for example equipment, receive additional money or rent which is all classified as other income. Companies must separate their expenditure into three categories under the headings of cost of equipment, cost of sales and business expenses. Any expenses  that arise in order to get or create your product or service are known as cost of sales. General company expenses which are essential for your company to function including insurance, rent and rates, administrative expenses for example stationery will all be collated under the heading of business expenses. All the expenses  for any equipment for the business is collated under the heading of cost of equipment.   This will include cost of purchasing and leasing equipment which will also cover any cars and vans the company owns or tools and machinery the company purchases.

It is necessary that all your ledgers are backed-up by receipts and that all of your personal, non company related receipts are kept separate especially in women's handbags and not included with your company receipts.

Although a company might choose when it wishes its year end to be, for self employed people and partnerships, it can be simpler if your year end finishes on 31 March or 5 April. If you wish your accounts facts to be complete and be ready for the submission of your tax returnn, by choosing a year end date of 31 March or 5 April will mean that your accounts and tax return info are the same and you are not required to cross reference to different years accounts to get the correct figure for your tax return. If your year end is out of sync with these dates, you could prepare a set of [financial statements] accounts for a particular date period and then start again with yearly financial statements. By deciding a specifc date for your financial statements to run too which can be more beneficial, then you can produce a set of accounts to that month end date from your year end and produce a period set of accounts instead of yearly accounts.   These financial statements will cover a set number of months. From then on, you will complete your accounts on an annual basis.

You have to make certain that you maintain all receipts and records supporting your revenue and expenditure. As a company you have to make sure that you keep all your paperwork to support your entries in your financial statements for  the legal time refrain which is a minimum of six years.

You will now be in a position to read any profit and loss accounts that you see and appreciate the information contained within them.

Be Sociable, Share!

•