Part D The formation and constitution of business organisations 13: Company formation 205A company is required to keep accounting records sufficient to show and explain the company's
transactions. At any time, it should be possible:
To disclose with reasonable accuracy the company's financial position at intervals of not more
than six months
For the directors to ensure that any accounts required to be prepared comply with the Act and
International Accounting Standards
Certain specific records are required by the Act.(a) Daily entries of sums paid and received, with details of the source and nature of the transactions
(b) A record of assets and liabilities
(c) Statements of stock held by the company at the end of each financial year
(d) Statements of stocktaking to back up the records in (c)
(e) Statements of goods bought and sold (except retail sales), together with details of buyers and
sellers sufficient to identify them
The requirements (c) to (e) above apply only to businesses involved in dealing in goods.
Accounting records must be kept for three years (in the case of a private company), and six years in that
of a public one.
Accounting records should be kept at the company's registered office or at some other place thought fit
by the directors. Accounting records should be open to inspection by the company's officers.
Shareholders have no statutory rights to inspect the records, although they may be granted the right by
the articles.
Failure in respect of these duties is an offence by the officers in default.4.10 Annual accounts
A registered company must prepare annual accounts showing a true and fair view, lay them and various
reports before members, and file them with the Registrar following directors' approval.For each accounting reference period (usually 12 months) of the company the directors must prepare
accounts. Where they are prepared in Companies Act format they must include a balance sheet and profit
and loss account which give a true and fair view of the individual company’s and the group's
Assets
Liabilities
Financial position
Profit or loss
The accounts can either be in Companies Act format or prepared in accordance with International
Accounting Standards. Where international accounting standards are followed a note to this effect must be
included in the notes to the accounts. Most private companies are permitted to file abbreviated accounts.The company's board of directors must approve the annual accounts and they must be signed by a director
on behalf of the board. When directors approve annual accounts that do not comply with the Act or IAS
they are guilty of an offence.
A public company is required to lay its accounts, and the directors' report, before members in general
meeting. A quoted company must also lay the directors’ remuneration report before the general meeting.
A company must file its annual accounts and its report with the Registrar within a maximum period
reckoned from the date to which the accounts are made up. The standard permitted interval between the
end of the accounting period and the filing of accounts is six months for a public and nine months for a
private company.FAST FORWARD