There is a requirement for all limited companies to prepare on an annual basis financial statements. These are used by a number of individuals/organisations who have an interest in the financial affairs of a company. These include:
Inland Revenue – A copy of the financial statements is required by HRMC, when the annual Corporation Tax Return is submitted.
Companies House – Within nine months of the accounting period end, a copy of the financial statements needs to be filed with the registrar of companies. Small companies may be able to take advantage of rules allowing for abbreviated accounts to be followed. These will disclose substantially less information than the normal ‘full set’ of financial statements.
Shareholders – These are the owners of the business, who through their financial investment, will have an interest in the performance of the company. In many instances the shareholders of a company are also the directors.
Bank and other lenders of finance – When applying for finance typically a bank will want to see current and also historical financial data on a company. Once loans have been approved, the banks will be keen to see that the company is in a position to repay its loans.
Customers and suppliers to a company may also be interested in the financial viability of a company before entering into business contracts, setting credit limits etc.