First annual accounts for a business - what's in them and how to prepare?

The first annual accounts are an important step for every entrepreneur. It summarises the financial situation of the business at the end of the financial year and serves both as a formal report and as a tool for future planning.

However, for a new entrepreneur, preparing accounts can seem like a complicated process. In this article, we'll go through what your first set of accounts entails and how to prepare for it.

What are financial statements?

The financial statements are the official summary of the company's finances at the end of the financial year. It includes:

• profit and loss account, which indicates the profit or loss of the company
• balance sheet, which shows the assets and liabilities of the company
• attachments, which provide more details on specific items and events during the financial year

The financial statements give the entrepreneur, the authorities, investors and financiers a picture of the company's financial position.

When do the accounts have to be drawn up?

• The limited company must prepare financial statements at the end of each financial year.
• Business owner you do not necessarily need to prepare formal financial statements if your business is small - but you will need to attach a profit and loss account and balance sheet to your tax return anyway.

Financial statements must be drawn up within four months of the end of the financial year. For example, if the financial year ends on 31 December, the deadline is 30 April.

How to prepare your first set of accounts?

1. Keep your accounts up to date
   With all your vouchers, sales invoices and purchase invoices in order, the closing process is easy.
2. Make sure you have your receipts and supporting documents
   Missing supporting documents can delay the financial statements and cause explanations.
3. Follow the results for a whole year
   The accounts should not come as a surprise. By checking profitability regularly, you'll know in time whether you're going to make a profit or a loss - and what the tax implications will be.
4. Allow time for checks
   Before closing the accounts, the accountant makes sure that all the entries have been made correctly. The entrepreneur should be prepared to answer any questions about the value of inventory or work in progress, for example.
5. Take advantage of expert help
   For many, the first annual accounts can be a new experience. A professional accountant will ensure that everything is done legally and on time - and that the entrepreneur understands the figures in practice.

Why are financial statements important?

Financial statements are not just a legal obligation. It helps to:

• see how profitable the business has been
• assess the company's liquidity and indebtedness
• provide you with a basis for future decisions
• reassure investors and financiers about the solvency of your business

Summary

A company's first set of accounts can feel like a big step, but it's also a great opportunity to understand the state of your business. If you prepare carefully and keep your accounts up to date, the process is much easier.

At Konkretia Accounting, we help entrepreneurs to manage their first set of accounts clearly, step by step - without hidden costs.