When working with your accounts, you’ll soon come to realise that ‘year end’ is an important moment. This is the term used to describe the day that your company’s financial period comes to an end, and it starts the clock when it comes to setting a deadline for you to file your end of year accounts.
What you need to know about the ‘year end process’
As you approach your ‘year end’ date, it’s vital to get your house in order, ensuring that all of your expenses are claimed, invoices chased and that your paperwork is all organised.
With all this in place, small businesses are likely to need to look at two key pieces of paperwork (the rules are different for sole traders):
- Company Tax Return: This contains details of your company’s income, capital allowance and tax requirements. It’ll be used to work out how much Corporation Tax you owe.
- Annual Accounts (or Statutory Accounts): This includes your income statement (showing your profit/loss), the statement of financial position (looking at the value of your business) and any footnotes (such as guarantees to directors or contingencies).
Deadlines for your end of year accounts
There are a couple of important deadlines to consider when it comes to your year end documents:
- HMRC needs to see both your Company Tax Return and Annual Accounts within 12 months of your year end. You also need to pay Corporation Tax within nine months of your year end.
- Companies House needs to see the Statement of Financial Position and any footnotes for your Annual Accounts. This has to be received within nine months of your year end.
In both instances, you can face substantial fines for missing these deadlines.
How to run the year end process
You can manually ‘move’ all of your profit and loss from one year into a separate area of your accounts to calculate your year end paperwork, but it is a laborious process.
That’s why KashFlow’s software allows you to create a report to make this as simple as possible.
To begin the year end process within KashFlow, simply navigate to Reports > Business > Year End and follow the on-screen instructions.
The Year End Process creates a Journal entry that essentially resets your Profit & Loss Report. When you run this process, the Journal entry will be shown on screen and you will have the option to tick the ‘Exclude from P&L’ tick box.
By default, this box is ticked when you run a year end report. This makes sure that your profit and loss codes are set to £0.00 at the start of your next financial year, and all previous years profit or loss is now moved to a retained profits code on your Balance Sheet.
If this box is not ticked, when you next run your profit and loss report, all codes will show as they did for the previous financial year. This would not be correct as the previous year’s profits have now been closed off.
Once you have navigated away from the Year End Process screen you can view the Journal entry created, under the Journals tab.