Sole traders, partnerships, clubs and societies don’t generally need their accounts audited. Some companies qualify for exemption from the need for an annual audit, but all other companies are required to have their annual accounts audited by a registered auditor.
The profit and loss account shows the income and expenditure of the organisation. However, treating your income and expenditure simply on the basis of what you’ve received or paid doesn’t give you an accurate guide to company performance. If you account for income as earned and expenditure when incurred a more accurate idea of performance is obtained.
You’ll also need to take account of stock that you have at the start and end of the year. By taking this into account your annual accounts will show goods or materials that you have used relative to the sales you have made.
Income may also need to be adjusted for work in progress when the yearend date occurs otherwise your accounts won’t show your business performance realistically.
Many small businesses find it unnecessary for us to visit their premises; in this case we receive the various books and records in our office and work from our office.
P S Alagaratnam is licensed and regulated by AAT under Licence Number 1000171.