Financial statements

person counting cash money

Financial statements

All businesses in the UK must prepare financial statements (also referred to as “accounts”) each year. Their purpose is to provide useful financial information in the following areas:

  1. How the business has performed over the year
  2. What is the financial position of the business at the year-end
  3. How the business has generated and used its cash over the year

Contents of a set of financial statements

The contents of a set of financial statements can vary to some degree, depending on the size of the business, as smaller businesses can usually provide less information than larger businesses, and way the business is structured (i.e. whether it is run as a sole trader business, a partnership or a company). A large company will include the following in its financial statements.

A statement of profit or loss

The statement of profit or loss provides information on the business’ income and expenses and the profit (or loss) made over the year.

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A statement of financial position

The statement of financial position (also often called the “balance sheet”) provides information on the value of the business’ assets, liabilities and equity at the end of the year.

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A statement of cash flows

The statement of cash flows provides information on where the business’ cash has come from over the year and how it was used.

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A statement of changes in equity

The statement of changes in equity provides additional information about the owners’ investment in the business and how it has changed over the year.

Notes to the financial statements

The notes to the financial statements provide additional details about the figures in the financial statements or provide information about how the figures were calculated.

Obtaining a copy of a set of financial statements

UK companies and limited liability partnerships, must file their annual financial statements with Companies House (Companies House – GOV.UK (www.gov.uk) where they are made available to the general public and can be downloaded for free. In addition, companies listed on a stock market usually have an investor relations section to their website where their accounts and other information about its finances can be obtained.

Sole trader businesses and other partnerships do not have to place their accounts on public record and would have to be requested directly from the business who might then refuse to provide them.

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