Fixed assets register

Fixed assets register

Fixed assets register is for your company’s long term assets such as machinery, delivery vans and computers. These business assets would be categorized in your company accounts as fixed assets. Your company could claim capital allowances on them.

You would usually write off your fixed asset cost to your profit and loss account over the asset’s economic useful life. For example, machinery may have longer economic useful life than your computers in your office.The wear and tear process is called depreciation by accountants.

It is make sense to record all your limited company assets into one place. This is called fixed assets register.

Your company’s accountants would normally do physical verification of your company assets as part of their audit work to ensure the figure recorded in your company accounts are correct, for example, if your company has bought a laptop last year and the cost is booked in your company accounts and the laptop has been stolen, then the cost of the stolen laptop must be written off to your company profit and loss account and your fixed assets register must be updated.

What to record in your fixed assets register?

The following information should be recorded in your fixed assets register, for every asset bought for your company’s use.

  • Date of your asset was purchased
  • Your supplier details
  • Description of your asset
  • The cost of your asset
  • Allocate unique reference number if your asset does not have its own serial number for easy identification by your accountants or your auditors.
  • Date of your asset last revalued
  • Amount of revaluation
  • Economic useful life of your asset such as computer generally last for 3 years.
  • Depreciation policy applied to your asset whether straight line method or reducing balance method is used.
  • Accumulated depreciation amount charge to profit and loss account so far
  • Net book value of your asset
  • Date and value of your assets being disposed for cash, if any.

The net book value of your fixed asset is to be included in the company account under fixed assets heading. Further disclosure required in the notes to your company accounts is the breakdown of your fixed asset cost, depreciation charge for the year and net book value of the total fixed assets.

Basic accounting principles

Basic accounting principles

Basic accounting principles that every limited company must adopt when preparing their company accounts are explained below.

Going Concern

You company accounts must be prepared on the assumption that the business will continue to trade in the future and therefore a going concern.

Where a company ceases to trade and your company may incur a number of costs which it would not normally face, such as redundancy payments to employees or early termination of contracts penalty and so on.

The value of your company assets have to be marked down to their actual realizable value in the open market. For example, unfinished products may have to be completely written off the profit and loss account.

Should your company is going to prepared the accounts not on a going concern basis, this fact has to be disclosed in your director report and notes to the accounts so that the readers (suppliers, bankers, creditors, shareholders, staff and other interested parties) of your financial statements understand your company financial and trading position clearly.

Consistency

The directors must select suitable accounting policies for depreciation of business assets, foreign exchange translation and accounting for stock valuation and applied them consistently within the same accounts so as to make the accounts easy to read and comparable from year to year.

Prudence

Your company accounts should be prepared prudently. This means only profits that have been realized should be included in your profit and loss account. In other words, sales should not be recognized in the profit and loss account until the goods or services have been supplied and normally the invoice raised.

Losses should be recognized in your company account as soon as possible by providing for the costs or writing down any asset whose value has been impaired as soon as appropriate. So you should recognize bad debt or write off obsolete stock as soon as you become aware of the problem.

Accruals Concept

All income and expenses for the period to which your accounts relate must be included in those accounts. Prepayments, accruals, capitalization of long term assets are examples of accruals concept being applied. The introduction of the accruals concept is to match costs against revenue so as to achieve accurate profitability for the relevant accounting year.

Historical Cost Convention

The revenue, costs and assets bought by your company are recognized in your accounts at the original cost regardless of present value.

Netting Off

Items should not be netted off in the accounts.

Departure from accounting principles

Your company director is responsible to ensure your company accounts are prepared in compliant to Companies Act 2006, a departure from any of these basic accounting principles would require a disclosure notes in your accounts together with the reasons for the departure.

Overall, the accounts must always give a true and fair view.

non-deductible business expenses

non-deductible business expenses

Non-deductible business expenses are expenses disallowed to be used for the purpose of reducing your business tax bill.

Generally, a business expense must be incurred necessarily and exclusively for your business under the UK tax law.

Where expenditure incurred relates to both business and private use, the amount related to personal use is not tax deductible for your company and the private expense must be added back to your business accounting profit.

Motor expenses

If a motor car is used for both business and private purposes, then the capital allowances and the total car running expenses will be split in proportion to the business and private mileage. You will need to keep records of your total mileage and the number of miles traveled on business to calculate the correct amount of motor car expenses for the business.

Entertaining customers

Entertaining expenses usually are not tax deductible but there are exceptions you may want to seek professional accountant advice on other entertaining expenses such as staff entertaining and gifts to employees.

Bribes, kickbacks. fines, penalties and lobbying costs.

These expenses are self explanatory of why they are not tax deductible.

Start-up costs.

If you have just started a new business, you may be wise to consult a professional tax accountant on this question, especially if your start-up costs are rather large.

Working from home

If you are working from home, you will need to keep sufficient records to back up the proportion of heating and lighting costs that relate to your business and your private use.

Life insurance premiums

A business may buy life insurance coverage on key officers and executives, but if your business is the beneficiary, the premiums are not deductible. The proceeds from a life insurance policy are not taxable income to your business if the insured person dies, because the cost of the premiums was not deductible. In short, premiums are not deductible, and proceeds upon death are excluded from tax.

Travel and convention attendance expenses

Some businesses pay for rather lavish conventions for their managers and spend rather freely for special meetings at attractive locations that their customers attend for free. The UK tax office takes a dim view of such extravagant expenditures and may not allow a full deduction for these types of expenses. The HM Revenue and Customs (HMRC) holds that such conventions and meetings could have been just as effective for a much more reasonable cost. In short, a business may not get a full deduction for its travel and convention expenses if the HMRC audits these expenses.

Transactions with related parties

The HMRC takes a special interest in transactions where two parties are related in some way. For example, a business may rent space in a building owned by the same people who have money invested in the business; the rent may be artificially high or low in an attempt to shift income and expenses between the two tax companies or individuals. The transactions may not be at arm’s length basis. A business that deals with a related party must be ready to show that the price paid or received is consistent with what the price would be for an unrelated party.

Seek advice from tax accountants if you have incurred business expenses that you are not sure whether they can be claimed against your business profit fully or partially.

Authentication code

Authentication code

Authentication code is required when come to filing your company’s documents online. The code issued by Companies House. Your authentication code is the electronic equivalent of your limited company director’s/sectary’s signature. The code is made up of 6 digits or mixture with numbers and alphabets.

You may find your authentication code in your company’s incorporation emails sent to you by your company formation accountants.

Companies House will also send your authentication code by letter to your company’s registered office address.

Misplaced your authentication code

You may request your code from Companies House again. They will re-send your code by post to your company’s registered office.

Change your authentication code

You may request Companies House to change or reset your company’s authentication code to your preferred or easy for you to remember password. You must put your request in writing and the letter must be signed by your company director.

No access to mails at your company’s Registered Office address

In situation where you no longer able to access mails send to your company’s registered office address for whatever reasons, you may write to Companies House explaining your situation.

Send in the form AD01 to give your new registered office address together with the explanation letter. Companies House will update your registered office address and then re-send the authentication code to your new company’s registered office address. This is a very lengthy process and it could take weeks. Companies House would not send your authentication code to anywhere else except your company’s registered office. They do not accept any excuse.

If your confirmation statement or company account is overdue and Companies House already proposing to strike off your company, our accountants would be able to help you to stop the striking off process and get your authentication code quickly.

Company accounts filing deadline

Company accounts filing deadline

Company accounts filing deadline is set by Companies House on the date your company was incorporated.

For example, if your company is incorporated on 28 December 2018, your default company accounting year end date would be 31 December and your company accounts filing deadline would be 30 September 2020, nine months after your accounting period. For a public limited company, your default filing deadline would be 30 June 2020, six month after your accounting year ended.

If you would like to change your company accounts filing deadline, you must apply with Companies House. It has to be formally approved by Companies House.

The filing deadline apply to companies with accounting periods beginning on or after 6 April 2008.

The filing periods for first accounts for a private limited company is 21 months whereas for a public company is 18 months.

Once your company accounts are filed with Companies House, they would be on public record and can be inspected by anyone interested in your company affairs.

A public limited company must submit an audited company accounts and for a private limited company could take advantage of the audit exemption and submit less detailed disclosure accounts as permitted by the Companies Act.

A dormant company must submit a dormant account with Companies House. No excuse.

There is a late filing penalty for delivering your company accounts late to Companies House.

Understanding balance sheet

Understanding balance sheet

Limited company is required to prepare a balance sheet in accordance with the applicable accounting standards and your balance sheet formed part of your company accounts.

Many people leave the preparation of their company accounts with their accountants and rely on their accountant to tell them how much corporation tax to pay and where to sign on their company accounts.

There are benefits to understand figures presented in your balance sheet, first you would need to learn the terminology used in Balance Sheet reporting. In the accounting world, balance sheet is a statement of your business assets and liabilities at the end of your company’s financial year.

The terminology used in a balance sheet is explained below.

Cash

Amounts of money held in hand including coins and currency; money in the bank accounts.

Trade Debtors

Amounts not yet collected from your customers or amount outstanding from credit sales.

Stock

Value of products hold in stock by your company, the stock value is normally made up of purchases cost, production costs or net releasable value of the products.

Fixed assets (Property, Plant and Equipment)

Amounts of costs invested in long life, tangible, productive, operating assets. People often referred this type of investment as capital expenditure.

Creditors and accrued liabilities

Amounts owing to suppliers for unpaid bills and invoices or directors for lending monies to the business.

Overdrafts and loans

Amounts borrowed on interest-bearing liabilities from bank and financial institution.

Called up share Capital

Amounts of capital invested in the business by owners (shareholders).

Retained earnings or reserves

Cumulative profits not yet distribute to shareholders.

The above is a simple set of balance sheet format that many small limited company would have. There would be more more complex balance sheet for larger companies.

A balance sheet for a dormant company is even more simplified. A dormant account literally only have share capital and called up share capital and issued share capital.

Audit exemption statement

Audit exemption statement

Limited company claiming audit exemption when preparing their company accounts must disclose the following audit exemption statement in your company accounts.

The audit exemption statement is to be included on the balance sheet page above your company director’s signature.

The wording of the audit exemption statement is as follows:

  • For the year ending (your company’s year end date), the company was entitled to exemption from audit under section 477 of the Companies Act 2006 relating to small companies.
  • The members have not required the company to obtain an audit of its accounts for the year in question in accordance with section 476.
  • The directors acknowledge their responsibilities for complying with the requirements of the Act with respect to accounting records and the preparation of accounts.
  • These accounts have been prepared in accordance with the provisions applicable to companies subject to the small companies’ regime.
Audit exemption

Audit exemption

Limited company is required by the UK company law to have their company accounts audited by a Registered Auditor unless they are entitled to audit exemption.

Audit exemption threshold

Audit exemption under the Company Law means your limited company accounts are not compulsory to be audited by a Registered Auditor.

To claim audit exemption, your company must meet the following criteria.

Audit exemption thresholdCompany accounts begin 1 Jan 2016Company accounts prior 1 Jan 2016
Sales less than£10.2 million£6.5 million
Business assets worth less than£5.1 million£3.26 million
No. of staff less than5050

Your company must engage a Registered Auditor to audit your company financial statements and accounts if your sales and business assets worth is valued more than the audit exemption threshold.

This aside, however, your bank or major creditors or investors may require your company accounts to be audited under their terms of lending or loans to your company regardless the audit exemption rules.

Also, take note that your company shareholders whom hold more than ten percent of your issued share capital could request your company accounts to be audited, in this situation your audit exemption entitlement is waived.

Dormant Company quality for audit exemption

Dormant company is qualify for audit exemption and is eligible to file dormant account with Companies House. Your dormant company must not be part of a group of companies that required audit by law.

Businesses do not qualify for audit exemption

Limited company with the following principal business activities are not qualify for audit exemption by defaults. In other words, your company must submit audited company accounts with Companies House.

  • A public limited company.
  • A company is parent or a subsidiary a group, with the group turnover exceed the audit threshold.
  • An authorised insurance company or carrying out insurance market activity.
  • A company involved in banking or issuing e-money.
  • A Markets in Financial Instruments Directive (MiFID) investment firm or an Undertakings for Collective Investment in Transferable Securities (UCITS) management company.
  • A corporate body and its shares have been traded on a regulated market in a European state.

Where to send your company accounts

Where to send your company accounts

All companies registered with the Companies House are obliged to submit their company accounts with the Registrar of Companies. It is the director’s responsibility to ensure this is done on time. This includes dormant company and non-trading company.

There is an automatic late filing penalty for filing your company accounts late with Companies House even just by one day.

The Companies Act requires your limited company directors to present your company’s Directors Report to your shareholders.

For a public limited company (PLC), you must lay your company accounts at a shareholders meeting, usually the annual general meeting whereas for a private limited company is no longer required to do so unless it is required by the articles of association of your company.

Your company accounts filed with Companies House are accessible by the public. This means your suppliers, customers, bankers and the public in general could see your company records registered with Companies House and obtain the documents directly from Companies House.

Where to send your company accounts to which Companies House office is dependent on your company’s registered office.

Limited company incorporated in England and Wales must deliver their company accounts to Companies House in Cardiff. Whereas for Limited company registered in Scotland are to file their company accounts with Companies House at Edinburg. Their respective addresses are listed below:

Cardiff Office Edinburgh Office
Companies House
Crown Way Maindy
Cardiff
CF14 3UZ
Companies House
4th Floor
Edinburgh Quay 2,
139 Fountainbridge
Edinburgh EH3 9FF
LP – 4 Edinburgh 2
(Legal Post) or
DX ED235 Edinburgh 1
London OfficeNorthern Ireland Office
Companies House
4 Abbey Orchard Street
Westminster
London
SW1P 2HT
Companies House
Second Floor
The Linenhall
32-38 Linenhall Street
Belfast
Northern Ireland BT2 8BG
or
DX 481 N.R. Belfast 1

If you require help with your company accounts preparation and filing with Companies House, contact us.

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