Company Formation

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Company Accounts and a director’s responsibility

All UK limited companies are required to keep accurate accounts and submit the relevant accountings statements to Companies House and HM Revenue and Customs within the correct time frames. This responsibility falls upon the directors of the company.

Directors are required by law to-
Maintain appropriate accounting records for the company
Prepare an annual profit and loss account
Prepare a balance sheet that shows true and fair views of events
Prepare a directors report
Make these records available to shareholders and the general public. (This is done by submitting accounts to Companies House the registrar of limited companies)

These responsibilities are legally embodied within the Companies Acts 1985, 1989 and more recently 2006. Company law goes a long way by setting out the form and content of the accounting statements that the directors must publish.

Whilst company law states that it is the directors responsibility to maintain accurate accounts most directors will appoint an accountant to prepare the actual financial statements for the company. This does not transfer the responsibility to the accountant and a director will still need to sign the relevant paperwork and sign a statement that the accounts are true and fair.

Depending on the size of the limited company it may also be necessary to appoint auditors to the company. The requirement is based on turnover and the threshold is adjusted on a regular basis. The main duty of auditors is to make a report as to whether, in their opinion, the accounting statements do show a true and fair view of the company’s finances. They also ensure that the accounts comply with statutory accounting standards. The auditors statements are then included with the accounts submitted to the registrar of companies.

This post was submitted by Steve Harris who provides Company Formation services

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