Year-end accounts can look complicated when they are full of terms such as balance sheet, accruals, liabilities, retained profit and depreciation. You do not need to be an accountant to understand what your company’s accounts are telling you.
For a UK limited company, the year-end accounts show how the company performed over its financial year and where it stands at the end of it. They are also a core part of the company’s reporting and tax obligations.
This guide breaks down the essentials in plain English, so you know what the numbers mean and can talk about them confidently with your accountant.
What are year-end accounts?
Year-end accounts are the financial statements prepared when a company reaches the end of its financial year. They set out the company’s:
- Income
- Expenses
- Assets
- Liabilities
- Overall financial position
How to read your year-end accounts, section by section
1. Profit and loss account: did you make money?
The profit and loss account shows the company’s income and expenses over the financial year.
Income minus expenses equals accounting profit or loss. For example, a company with £100,000 of sales and £70,000 of expenses shows an accounting profit of £30,000 before tax and other adjustments.
The profit and loss tells you:
- How much income the company generated
- How much it spent, and whether expenses went up
- Whether a profit or loss was made
- How this year compares with previous years
Profit is an important figure, but accounting profit is not the same as the money in the bank.
2. Balance sheet: what does the company own and owe?
The balance sheet is a snapshot of the company’s assets, liabilities and equity on the last day of the financial year.
What the company owns or is owed:
- Cash in the business bank account
- Stock
- Equipment and vehicles
- Money owed by customers
What the company owes:
- Unpaid supplier bills
- Loans
- Tax and wages due
- Director’s loan account, where the director is owed money
Seeing both sides gives a clearer picture than profit alone. Assets minus liabilities equals net assets.
3. Assets: what does the business own?
Assets are items of value the company owns or controls. Current assets include cash, stock and money customers owe you. Fixed assets are things like machinery, vans and equipment that the business expects to use for more than a year.
4. Liabilities: what does the company need to pay?
Liabilities are amounts the company is responsible for paying: unpaid supplier invoices, tax due, bank loans and similar. A company can make a profit and still carry heavy liabilities, so it helps to look at both figures together. This can flag a cash flow problem before it becomes a serious one.
5. Retained profit: what can you take out?
Retained profit is the accumulated profit the company has kept after Corporation Tax and dividends. It is an accounting figure and does not necessarily equal the cash in the bank.
This is the figure a director needs to check before taking money out of the company as a dividend. Dividends can only be paid from retained profit.
6. Accruals and prepayments: what do they mean?
Accruals are expenses recognised in the accounting period even though they have not yet been paid or invoiced.
Prepayments are the opposite: expenses paid in advance for a future accounting period, such as an annual insurance premium.
7. Depreciation: why does an asset lose value on paper?
Depreciation spreads the cost of an asset over its useful life. If a company buys equipment it will use for several years, the cost is spread across those years rather than charged all at once.
Depreciation reduces accounting profit but no cash leaves the bank when it is charged. This is one of the main reasons profit on paper differs from money in the account.
Are year-end accounts and Corporation Tax the same?
No. They are related but not identical. Tax rules require adjustments to the accounting profit when working out Corporation Tax, so the profit in the accounts is not automatically the profit for tax purposes. Your accountant can show you the differences and exactly which figures are used to calculate your tax bill.
When are UK year-end accounts due?
Most private limited companies have three separate deadlines:
- Accounts to Companies House: within 9 months of the financial year end
- Corporation Tax payment to HMRC: 9 months and 1 day after the year end
- Company Tax Return (CT600) to HMRC: 12 months after the year end
Filing your accounts does not clear your tax obligations, and each deadline carries its own penalty. Companies House charges an automatic late-filing penalty from the first day your accounts are late, and it increases the longer you leave it.
Change from April 2027: Companies House will only accept accounts filed through approved software, and small companies will have to file a profit and loss account rather than abridged accounts. If you file your own accounts today, this is the year to move to an accountant or to software.
What should I give my accountant?
Having the right information ready makes year-end accounts a quick job. Depending on your business, your accountant will usually need:
- Business bank statements
- Sales invoices
- Purchase invoices and expense receipts
- Payroll records
- VAT records
- Details of loans
- Asset purchases and disposals
- Stock records
- Unpaid customer and supplier invoices at year end
- Dividends paid
- Director’s transactions and loan account movements
With these to hand, your accounts are less likely to be delayed and errors are easier to spot.
Questions to ask when going through your accounts
- Did sales go up or down this year? A quick read on whether the business is growing.
- Did expenses increase? Find out which costs need a closer look.
- What does the company owe? Debts to suppliers, HMRC and the bank affect cash flow regardless of profit.
- How much do customers owe the company? Unpaid invoices reduce available cash even though the income is already in the accounts.
- How much Corporation Tax will I owe? Ask how the taxable profit was reached.
- Can I take a dividend, and how much? The answer is in the retained profit figure.
- Is there anything I should fix before next year end? This makes the next set of accounts easier.
Why year-end accounts matter
Treated as paperwork to file away, accounts are not much use. Read properly, they tell you how much profit the business made, how costs compare with previous years, what the company owns and owes, and where the business stands before you plan the next year with your accountant.
Year-end accounts made simple with Lexarox Accounts
If the jargon is what makes your accounts hard to read, we can help. Lexarox Accounts has prepared accounts for limited companies, sole traders, contractors and partnerships since 2013. Our accounting services include:
- Year-end accounts and Corporation Tax filing
- Bookkeeping and management accounts
- VAT registration and returns
- Self Assessment for directors
- Payroll, CIS and pension auto-enrolment through Lexarox Payroll
We explain your accounts in plain English, in English, Romanian, Spanish, Italian or Russian, and we are rated 5.0 on Google.
Send us your documents on WhatsApp 0747 235 6282 and we do the rest, or book a consultation.
Lexarox Accounts, MS.128, 203-213 Mare Street, Hackney, London, E8 3JS
Tel: 0208 533 1358 | WhatsApp: 0747 235 6282 | Email: info@lexaroxaccounts.co.uk
Final thoughts
You do not need to be an accountant to understand year-end accounts. You only need enough to know how much profit the company made, how much cash it has and how much tax it owes. The balance sheet tells you what the company owns and owes, and accruals, prepayments and depreciation explain why profit and cash rarely match. Once you have the basics, your accounts become a tool for running the business, not just a filing obligation.
Frequently asked questions
What are year-end accounts?
A summary of what your company did over its financial year, made up of the profit and loss account and the balance sheet.
What is a balance sheet?
A snapshot of the company’s assets, liabilities and net assets on the last day of the financial year.
Is profit different from cash?
Yes. Unpaid invoices, loans, asset purchases and depreciation all cause profit and cash to differ.
When do accounts have to be filed?
Most private limited companies have nine months from the financial year end to file with Companies House. Corporation Tax is due nine months and one day after year end.
Can an accountant prepare and file my company accounts?
Yes. Lexarox Accounts prepares and files your accounts, Corporation Tax return and confirmation statement, and can verify your identity with Companies House as an Authorised Corporate Service Provider.
