Preparing and filing abridged accounts is a way for you to limit the amount of knowledge that the public has about your finances. Indeed, many sole traders and partnerships are put off incorporation because, once a year, they have to file for public view the financial affairs of their company.

In this article, Burton Beavan will explain what abridged accounts are.

What was an abbreviated account?

An abbreviated account was a shortened financial statement that qualifying small- or medium-sized businesses could choose to file with Companies House. These accounts were abolished as of the 1^st January 2016. And they were replaced with abridged accounts.

What is an abridged account?

Abridged accounts don’t contain the detailed financial information shown in a full set of accounts. In order to qualify for this account, your company must:

• Have a turnover of below £10.2 million
• Have a balance sheet total of below £5.1 million
• Have a maximum of 50 employees

What goes into an abridged account statement?

The balance sheet includes a detailed breakdown of each asset and liability which is either owned or owed by the company. A balance sheet should include:

• Assets

An asset can be anything from cash, prepaid expenses, marketable securities, fixed assets, and accounts receivable.

• Liabilities

The liabilities on the balance sheet should include things like taxes payable, accounts payable, and long-term and short-term debts that the business needs to pay.

• Shareholder’s equity

These include retained profit (profit that has been made and that has already been taxed), stock, and treasury stock.

All of these above items combine together to form a gross profit and a gross loss along with any other extraordinary income changes.

Why file an abridged account?

By filing a fully abridged account, a business has the liberty of choosing what financial information they make available to the public. That being said, abridged accounts must still be a fair and accurate reflection of your company’s finances.

Making the decision to file this account must come with the consent of every single member of the company, not just from the directors. Once each member has given their explicit consent, Companies House can be informed through an official statement. It is worth mentioning that consent must be regained from each member each year.

Filing rules

According to an update to the filing rules on abridged accounts, small companies have been given the choice to not file their directors report and/or a copy of the full profit and loss report to Companies House.

A company that exercises their right to do this is known as “filleting” their abridged accounts. As far as Companies House is concerned, including a note in the filed accounts is sufficient to inform them that you are going to be abridging your accounts.

Micro-entities

If your company qualifies as a micro entity, then you are only required to file a copy of your balance sheet along with a small number of footnotes. Micro-entities also don’t have to file director’s reports and profit and loss reports.

To qualify as a micro-entity, your company must not have:

• A turnover more than £632,000
• A balance sheet of more than £316,000
• More than 10 employees

It is worth noting that if your company is a public limited company, a limited partnership, or a charitable organisation, you cannot qualify as a micro-entity.

We can help

If you are a business owner and you would like to know more about abridged and abbreviated accounts, get in touch with our team. You can call us on 01606 333 900 or email us at hello@burtonbeavan.co.uk.