Financial Statements
Companies are required to prepare financial statements in compliance with the Companies Act or International Financial Reporting Standards (IFRS). These statements, including the profit and loss account and balance sheet, are derived from the company’s books of account, reflecting its transactions. Directors must lay these statements, along with a director’s report and auditor’s report, before the general meeting. The accounts must give a true and fair view of the company’s business, assets, and liabilities.
Auditors assess whether the financial statements present a true and fair view and report their findings to the members. Certain smaller companies may be exempt from audit requirements. Directors of small or medium-sized companies may prepare abridged balance sheets for filing, subject to legal specifications. It’s imperative that financial statements meet the true and fair view requirement, as directors are duty-bound not to approve statements unless they are satisfied of their accuracy.
Accounting standards guide the preparation of financial statements, ensuring consistency and compliance. Management accounts, though not statutory, are often used internally for business analysis. Companies can opt to prepare accounts under either the Companies Act or IFRS standards, with specific rules for each framework. Financial years typically begin at incorporation and end on a date determined by the directors, subject to certain limitations and disclosures.
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