Tax Guides

How to prepare full statutory accounts

How to prepare full statutory accounts

How to prepare full statutory accounts

April 19, 2021

All UK limited companies are legally required to complete statutory accounts each year. These are submitted to HMRC and Companies House, as well as provided to all shareholders or made available to anyone who is entitled to attend general meetings.

To produce full statutory accounts, several financial reports and business documents must be included. These help explain the reasons behind the company’s business and financial performance over the past year.

What needs to be included in your full statutory accounts:

  • A balance sheet

This is a financial statement which gives an overview on three key aspects which are often used to judge your company’s financial health – the total assets, the total liabilities, and the total of shareholders’ equity.

– Total assets can be further broken down into current assets (things which are liquid or easily liquidated such as cash in the bank or stock) and fixed assets (things which hold value and are generally kept for long periods of time such as land and buildings, machinery and vehicles).
– Similarly, total liabilities can also be further broken down into current liabilities (any money due to be paid within the year such as staff salaries) and long-term liability (money which is expected to be paid back over longer periods than a year – such as repayment of large bank loans).
– The shareholders’ equity is the value shareholders can claim from the company’s assets, but only after debts have been paid. The shareholders’ equity is therefore calculated by the company’s total assets minus its total liabilities.

The balance sheet must also include the name and signature of a director to confirm that they have approved the accuracy of the accounts.

  • A profit and loss statement

Unlike the balance sheet, the profit and loss statement shows a company’s financial activity across a period of time, rather than an overview at a fixed point in time. The profit and loss statement will show the total revenue earned and total expenses of the business throughout the year.

To determine the company’s gross profit, you simply deduct the cost of sales from the company’s annual turnover figure. The profit and loss statement will often contain additional information as well such as earnings before interest, tax, depreciation and amortisation (EBITDA).

  • A cash flow statement

The cash flow statement explains the movements of cash made by the company. It does not take into consideration the value of other assets the company may own. It also differs from the profit and loss statement because it only records when money has fully been received by the company and when money has been paid out. The two can therefore largely differ in figures and are used for different purposes.

The cashflow statement is often broken up into three categories:

– Operating activities: how much money is generated from sales of products or services minus the cost to supply and sell the products or services
– Investing activities: how much money has been spent on capital expenditure such as new equipment necessary for the business
– Financing activities: how much capital is being raised or paid out. This part of the report shows whether the company is raising capital such as by selling shares or whether it is repaying capital to investors through dividend payments to shareholders.

  • Notes about the accounts

This is supplementary supporting information which explains both the balance sheet and profit and loss account and provides evidence to the figures. Some notes must be included as they are required by law as part of demonstrating that the specified accounting principles have been followed. Additional notes can also be included which will further help explain the company’s financial position.

  • A director’s report

This report should be prepared by a company’s board of directors and is particularly important to shareholders. For larger companies who are required to complete full statutory accounts, it is a legal requirement to complete this report as part of holding the company accountable for making decisions in the interest of the business and its shareholders. A director’s report can be quite detailed and may include some or all of the following:

– Names of all persons who were directors of the company during the financial year reported in the accounts
– Analysis of the company’s performance within its market
– Summary of the company’s current financial position
– Description of the company’s principal business activities, objectives, and strategy
– Current state and future viability of the market in which the company operates
– Summary of likely future prospects and developments
– Any trends or factors that are likely to affect the company’s future performance, development, or financial position
– The company’s capacity for expansion and growth
– Description of principal risks and uncertainties that the business is facing
– Explanation of how the directors have assessed the company’s prospects, risks, and uncertainties
– Explanation of how these opportunities and challenges are being managed
– Any important financial events affecting the company that occurred after the date on the balance sheet
– Significant changes to fixed assets belonging to the company
– Recommendations for dividend payments
– Whether the business and its directors are complying with all necessary regulations, standards, and responsibilities
– The report must also include the company VAT registration name

  • An auditor’s report

This needs to be carried out by an external auditor or chartered accountant. The report is an independent evaluation and review of a company’s annual accounts to confirm its accuracy. An auditor’s report will include:

– A confirmation of the responsibilities of the auditor and the company’s directors
– Confirmation as to whether the accounts have been properly prepared following Generally Accepted Accounting Principles (GAAP) and the requirements of the Companies Act 2006 (CA 2006).
– An assessment as to whether the financial statements are true and fair
– Any additional comments the auditors may have including concerns or recommendations
– A company director’s name and signature as acceptance of the auditor’s report

How to format statutory accounts


For all financial reports included as part of your statutory accounts – including your balance sheet, profit and loss statement and cashflow statement – these must meet either International Financial Reporting Standards or GAAP to be accepted by HMRC. For this reason, it is recommended that you seek advice or assistance from a chartered accountant if you are required to submit full statutory accounts. You can use our contact form below or contact us directly on 01865 24 55 11 to see if we can help.


Stay up to date

If you liked this post or found is useful, why not sign up to our monthly email newsletter? Easy reading, the latest news and information, delivered direct to you.
Sign up now

Looking for some help?

If you’re ready to hire an accountant, then get started by completing our contact form for an introductory call to discuss your needs.

Find out more about our Statuory Tax Return service.

    How can we help?


    Related articles

    We hope you enjoyed reading this article. If you would like to read similar posts on this subject here are some more for you.
    Back to Tax Guides Home