Accounting records and financial reports that need to be kept

What accounting records and financial reports need to be kept?


All limited and unlimited companies, whether or not they are trading, must keep adequate accounting records. This means records that are sufficient to show and explain the company's transactions, disclose with reasonable accuracy, at any time, the company's financial position and enable the directors to ensure that any accounts required to be prepared comply with the Companies Act 2006. What amounts to adequate accounting records will depend on the nature and complexity of the business.

Explanatory notes to the Companies Act state, “Accounting records is a broad term and there is no specific definition as the records may differ depending on the nature and complexity of the business. For a simple business these may include, for example, bank statements, purchase orders, sales and purchase invoices, whilst a more sophisticated business may have integrated records, which it holds electronically.” For a small private company, enough accounting information in order to produce an accurate balance sheet and a profit and loss account is usually what is required. Failure to keep adequate accounting records is a criminal offence with every company officer in default.

Part 15 of Companies Act 2006 sets out the obligations relating directly and indirectly to the accounts or financial information to be provided by a company to its members (and others) and the Registrar of Companies. Some of the obligations in Companies Act are imposed directly on the directors and others on the company as an entity, although the directors will still be responsible for ensuring that the company complies with them. The Companies Act 2006 is structured so that it draws a distinction between the size of an entity and whether it is a private or public company. Small private companies have to provide considerably less accounting detail than large public companies.

Accounts (usually along with a directors’ report and an auditors’ report) must be filed at Companies House for every company (except for dormant subsidiary companies) each financial year. A company produces its accounts by reference to the accounting period which ends on its accounting reference date. Generally, a company’s accounting reference date is the last day of the month of the anniversary of the company’s incorporation, but this can be changed.

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