Business accounting
While only Limited Partnerships and Limited Companies must produce formal accounts, all businesses need a way of keeping track of their income, expenditure, assets, debts (liabilities) and any profits/losses.
Businesses preparing published accounts must follow a series of accounting principles and conventions that allow them to be compared against other organisations. These accounts show a snapshot of a business’ activity on one day at the end of their tax year. HMRC have set ‘accounting principles’ to ensure accounts are produced in a standard format to allow this comparison.
Essentials Tip: Cashflow vs Profit
A business’ cashflow shows all the money flowing into and out of a business over a period of time, calculated at the exact time the cash physically enters or leaves the bank account or business.
Profit is the difference between the total amount the business earns and the total costs to run the business.
WHO USES PUBLISHED ACCOUNTS & WHY?
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A business will use their accounts to:
Lenders, Investors, and Customers will use a business’ accounts to:
