Final accounts explained: What every business should know

Final accounts are a crucial part of a company's financial reporting process. While wrapping up the year‑end books can feel like a chore, final accounts are where everything comes together. They are like an annual report card for your business, showing how it performed financially throughout the year and helping you prepare for the upcoming one.

As a business, you make sure you complete your year‑end accounts without fail, but do you actually know how they work and why they are important for your business growth? This article will tell you everything you need to know.

What are final accounts?

Final accounts, also known as year‑end accounts or statutory accounts, provide a comprehensive overview of your company's financial performance at the end of the financial year. They are typically used to describe the accounts filed by limited companies and limited liability partnerships (LLPs). Final accounts are termed “final” because they represent the culmination of a company’s financial activities over the accounting period. They also serve as the basis for tax calculation and regulatory compliance.

How do filing requirements differ for each company size?

The UK government recognises that businesses come in different sizes and forms. As a result, filing requirements have been tailored accordingly. Let’s break down the different sizes of businesses and how filing works for each.

Final accounts for limited companies

If you run a limited company, you must file a set of final accounts with Companies House. You also need to file them with HMRC as part of your Company Tax Return. This requirement applies regardless of the company’s size, even if it is dormant or has not traded during the financial year.

Listed below are the elements that final accounts for limited companies should include.

• Balance sheet: A financial statement prepared at a specific point in time, usually on the last day of the accounting period. It shows what the company owns and owes. The balance sheet must include the director’s name and signature.

• Profit and loss account (Income statement): Helps you understand the financial performance of the company over a specific period. It shows how much profit the company made and how much it lost.

• Directors’ report: Provides context to the financial statements; it’s essentially the story behind the numbers. While not mandatory for all companies, it can help explain the finances. (Note: Not applicable for micro‑entities.)

Notes to the accounts (where required): These notes provide a detailed breakdown of the figures mentioned in the balance sheet and profit and loss account.

Final accounts for LLPs

Final accounts for limited liability partnerships must be filed with Companies House, similar to limited companies. These should include:

• Profit and loss account or income and expenditure account (if the LLP is not trading for profit)

• Balance sheet with the name of a member printed and signed by them on behalf of the board

• Notes to the accounts (if required)

• Group accounts (if appropriate)

(Note: Unless exempt from audit, LLP accounts must be accompanied by an auditor’s report, including the auditor’s name, signature, and date.)

Micro‑entities

A company is considered a micro‑entity if it meets at least two of the following criteria:

• Turnover of £1 million or less

• £500,000 or less on its balance sheet

• 10 employees or fewer

Micro‑entities benefit from a quick and easy submission process and can file accounts with minimal disclosure. Listed below are the filing requirements for micro‑entities:

• Simplified profit and loss account that meets minimum requirements

• Balance sheet along with footnotes

• Auditor’s report (unless the company is claiming an exemption)

• Notes to the accounts (if required)

What is FRS 105?

FRS 105 is a financial reporting standard applicable to micro‑entities in the UK. Under this standard, companies can maintain a simpler set of accounts than those required for small, medium, or large companies.

Small companies

A company is considered small if it meets at least two of the following criteria:

• Turnover of £15 million or less

• £7.5 million or less on its balance sheet

• 50 employees or fewer

The filing requirements for small companies are more comprehensive than those for micro‑entities and are listed below:

• Profit and loss account

• Balance sheet with the director’s name printed on it along with their signature on behalf of the board

• Notes to the accounts

• Group accounts (if a small parent company chooses to prepare them)

• A directors’ report that shows the signature of a secretary or director and their printed name

• Auditor’s report with the name and signature of the registered auditor (unless the company qualifies for an exemption)

Dormant companies

A company is considered dormant if it has no significant transactions during the financial year that are usually included in reports. This includes:

• Filing fees paid to Companies House

• Penalties for late filing of accounts

• Money paid for shares when the company was incorporated

Filing requirements for dormant companies

• Balance sheet containing statements above the director’s signature, along with their printed name

• Previous year’s figures for comparison (even if there are no items of income or expenditure for the current year)

• Certain notes to the balance sheet

A word from Zoho Books

We understand that regulations keep changing, and managing multiple tasks as a business can shift focus away from business growth. That’s why our cloud accounting software is here to help you with final accounts (FRS 105) and Corporation Tax (CT600) filing. (Please note that for now, this capability is available for micro-entities only.) From handling your everyday accounting tasks to keeping you compliant, Zoho Books takes care of it all!

Remember, final accounts are not just about compliance but also about knowing your business’s financial position so you can plan for a better year ahead.