Notes to the Accounts - help!

[rangi500]

Hello,

I run a very small limited company (just £200 turnover this year) and seeing as my the affairs are so simple, I'm attempting to do the tax return myself. It's going well so far - my CT600 was accepted at first, but then later rejected because I had omitted the Notes to the Accounts.

To work out what needs to go into the Notes to the Accounts, I've been looking at two template/example documents, and I've noticed they're quite different (see comparison below).

Does anyone have a guide for writing Notes to the Accounts, or have any information as to what the minimal requirements are?

Any help much appreciated,
Rangi

---

Comparison of the two examples I've seen:

Section headings from first example:

1. Accounting policies
2. Turnover
3. Operating profit
4. Interest payable
5. Taxation
6. Intangible fixed assets
7. Tangible fixed assets
8. Investments
9. Debtors
10. Investments held as current assets
11. Creditors: amounts falling due within one year
12. Creditors: amounts falling due after one year
13. Loans
14. Provisions for liabilities
15. Share capital
16. Share premium
17. Revaluation reserve
18. Capital redemption reserve
19. Profit and loss account
20. Dividends
21. Post balance sheet events
22. Capital commitments
23. Pension commitments
24. Other financial commitments
25. Contingent liabilities
26. Transactions with directors
27. Related parties
28. Controlling party

Section headings from second example:

1. Accounting policies
2. Grants & donations
3. Fixed Assets
4. Debtors
5. Prepayments
6. Creditors
7. Advance receipts
8. Movements in restricted funds
9. Staff costs and numbers
10. Analysis of net assets by fund
11. Directors' renumeration, benefits and expenses
12. Independent examination and accountancy services
13. Glossary of terms

 

[David Griffiths]

Example two is from a charity isn't it? I take it that your company isn't so don't use the charity as a precedent

The other example looks to be quite comprehensive, and you won't want all of the sections. The following are usually not required for smaller companies, but of course could be if your company has the relevant income/costs/assets etc


6. Intangible fixed assets
8. Investments
9. Debtors
10. Investments held as current assets
13. Loans
14. Provisions for liabilities
16. Share premium
17. Revaluation reserve
18. Capital redemption reserve
21. Post balance sheet events
22. Capital commitments
24. Other financial commitments
25. Contingent liabilities

That does leave you quite a few to learn about. An accounting textbook is the obvious place to look, unless somebody on here has the patience to type out a comprehensive guide

You only have to file those notes that are relevant to your circumstances

 

[elaine@cheapaccounting]

I really think was £200 turnover you cannot possibly be too much to put in the notes to the accounts.
I expect your CT600 was rejected because you did not include full accounts.

What do you have in your P&L and B/S - then maybe we can advise on the notes.

 

[rangi500]

Thanks very much for your replies, I'm really grateful.

The letter I got from HMRC said the CT600 was rejected because I didn't submit a Directors' Report or Notes to the Accounts.

Here's what I submitted for the P&L and B/S:

• Balance Sheet
• Profit & Loss account

This is what I'm planning to submit for the Directors' Report:

• Directors' Report

But I'm still confused as what to include in the Notes to the Accounts!

Any help would be very much appreciated!

 

[elaine@cheapaccounting]

Just do something like this. BTW is Julia just the secretary - in which case take her off the directors list.



Notes to The Accounts


1. Accounting Policies

Basis of accounting


The accounts have been prepared under the historical cost convention and in accordance with the
Financial Reporting Standard for Smaller Entities (effective January 2007).

Turnover


The turnover shown in the profit and loss account represents amounts invoiced during the year.

2. Cash and Bank
£
Cash and Bank 190


--------------------------------------end

Note - align the £ sign over the top of the 190. Can't do it on here.

 

[rangi500]

Elaine thank you so much for your replies. I was surprised to see your suggested Notes to the Accounts is so short, but I see from your website you have 20 years experience so I'll definitely take your word for it!

Can I really get away with just 3 lines for the Cash and Bank section? That would be great but just want to check I'm reading it correctly.

By the way, I'm a professional web developer, so if you ever need advise about websites etc, I'd be more than happy to repay the favor with help and advise.

 

[elaine@cheapaccounting]

check out some examples on the Companies House web site - given your financials the notes will do. Will all due respect you could probably put all the financial transactions onto one page!

 

[David Griffiths]

There's no entry in your balance sheet for share capital. (Nor the note relating to share capital of course!)

When the company was formed shares might have been issued in one of two ways

a) the subscribers - the people who signed the Memorandum - would have subscribed for at least one share - possibly more; or

b) the directors could have issued more shares, and filed a form 88(2) with Companies House to confirm this.

You should have completed an annual return (form 363, with the fee of £15 online or £30 on paper) How many shares did you put down for this?

The other figure is the authorised share capital, clause 5 in the memorandum. Give me those figures and I 'll give you some wording

The general idea is that you pay your share capital into the bank, but in reality it's usually set against costs that you've incurred for the company - such as the formation expenses which aren't in your P&L, and no doubt you've paid stationery and other costs out of pocket - not least mileage.

(BTW it was pretty bloody minded of the Revenue to reject such simple accounts because there were no directors report or notes . It was probably their best way out of doing any work)

And Cash at Bank doesn't need a note (Sorry Elaine!) - it's not in the example formats if you look. So that's one in and one out for me!

 

[elaine@cheapaccounting]

no problem for me.

It was the smallest set of company accounts I had ever seen - so trying to pad out a bit

 

[rangi500]

Thank you very much. I have one share issued (to myself) and I got it when I created the business. Clause 5 of my Memorandum says "The share capital of the Company is 1000 GBP divided into 1000 ORDINARY shares of 1 GBP each."

I paid for the company formation myself (personally) - is this okay? I hoping to keep my accounts as simple as possible.

I haven't paid the £1 into the account for the share. My business doesn't have any running costs yet, but I have had one expense - a bank charge - so if I need to specify the share in my accounts, perhaps I can set it against that?

I've been searching and browsing the Companies House website for examples of Notes to the Accounts but haven't managed to find any - does anyone happen to know what section they might be in?

 

[CassioAcc]

The notes are an accounting requirement. They are issued by the Accounting Standards board (ASB).

 

[David Griffiths]

Share capital
£
Authorised
1,000 Ordinary shares of £1 each 1,000

Allotted called up and fully paid
1 Ordinary share of £1 1


Put share capital in of £1 on the credit side of the balance sheet and add £1 to cash in hand - just add it to the £190 for the cash at bank and in hand figure

Capital and reserves
Called up share capital 1
Profit and loss account 190

Total 191


The accounts that you have will be rejected by Companies House, partly because they don't contain the correct statements about entitlement ot file abbreviated accounts, so I suggest that you use their online system, which gives you a form to fill out. It is pretty crap, but it will make sure that the accounts are in the correct format - you only need a balance sheet to file

 

[CassioAcc]

and your balance sheet should be signed by the Director

 

[rangi500]

Thanks for all your help today everyone.

Taking into account your feedback, here is my latest attempt at the accounts. I'm going to re-file my CT600 online and attach this file (my previous submission was rejected because I didn't include the Directors' Report or Notes to the Accounts). It would be really great if somebody could have a quick glance and see if it looks ok (in particular, the Directors' Report and Notes to the Accounts).

@David Griffiths: I wasn't sure where in the Balance Sheet to put the notes relating to share capital. After following your suggestion, my Balance Sheet now looks like this (below) - please could you let me know where to put the notes relating to share capital?

Many thanks again to everyone for all your help.

 

[dp0848]

Your balance sheet does not balance! You need to add £1 to the cash balance of £190.

David.

 

[David Griffiths]

All of the notes go on a separate page after the balance sheet. Note 1 Accounting policies per Elaine and note 2 Share capital from me.

That should sort you out for the Revenue. Use the Co House online filing for their requirements, as all of the declarations are embedded in their proforma for abbreviated accounts. It won't ask you for the share capital note by the way - yes it should be there and yes Companies House own form is wrong.

 

[rangi500]

Your balance sheet does not balance! You need to add £1 to the cash balance of £190.

Oops, thanks for noticing that, I think I fixed it now - is this right?

I've also made this change to the document I will attach to my online CT600.

 

[rangi500]

David, thanks again for your time, I really appreciate it.

Do you think this will do the trick? Should I get rid of note #3, now that the notes are a bit more padded out?

 

[David Griffiths]

That will do fine. There's nothing that says you can't put in more notes than required.

I don't do it at work of course, because I don't like doing things that I don't have to do and don't get paid for!

 

[Glyde22]

Rangi500, I'm in a very similar position to you with a very small software company that had little activity this year with a small loss of approx £200. I've followed a very similar process to you i.e. setting up a company for evening and weekends with the view to growing this gradually. I'm just preparing my submission and I'm looking to follow your example closely and just wanted to know if you managed to submit everything OK.

 

[rangi500]

Hi Glyde22,

Yes following the advise on here I did manage to submit everything successfully, so I'm sure you'll be fine. Once you've done it it's a huge relief, because you know the next year will be much easier, as you've done it before.

Cheers,
Rangi

 

[Glyde22]

Rangi500, Thanks for the feedback, thats really good to know.

Glyde22

 

[Joff]

Very useful run through for me as I'll be in a similar position with low turnover, sole director, etc. Many thanks!

 

[DickM]

Hi Glyde22,

Yes following the advise on here I did manage to submit everything successfully, so I'm sure you'll be fine. Once you've done it it's a huge relief, because you know the next year will be much easier, as you've done it before.

Cheers,
Rangi

It's surprising how much you can forget in a year! But then I'm sure you are astute enough to have made notes ......... not just the directors ones to the Accounts!