A
'Accounts' is a generic term for the financial documents that companies in the
UK are required to file each year. Most companies filings will include a Profit
& Loss account, a Balance Sheet, a Director's Report and Auditor's Statement.
Limited companies have up to 10 months after the financial year
end to file accounts for that year, so the first accounts for a new company are
due 22 months after incorporation. PLCs must file within 7 months of year end.
95% of companies file their accounts on time.
Companies that do not file accounts on schedule incur fines from
Companies House on a sliding schedule, and will eventually be dissolved if they
do not comply.
Summarises current directorships and company/capital structure. Filed annually.
The Annual Return should be filed within 28 days of this date each year.
An audit is the official inspection of a company's accounts by a qualified accountant
as required by Companies House each year to ensure that the company balance sheet
reflects the true state of its affairs.
The total amount of share capital that a company is allowed to issue.
B
The balance sheet looks at two financial aspects, ASSETS - which the company owns,
and LIABILITIES which the company owes. Whilst the Profit & Loss account is
the culmination of a years activities, the Balance Sheet looks at the company's
assets and liabilities on one day - in effect a snapshot.
C
The movement of cash in and out of a business. Cash is usually required to pay
a company's bills and commitments.
A company with negative cash flow has less cash coming in as receipts
than going out in payments. Negative cash flow can bankrupt a business that may
actually be running profitably.
The company's 'birth certificate' as issued by Companies House on the day of incorporation.
A loan taken out by the company, usually against some form of security. The satisfaction
of secured charges should be filed by the Company Secretary but very often this
is overlooked.
How long, on average, a company takes to pay its' debts.
Companies House is an executive agency of the Department of Trade and Industry,
and has five main functions:
the registration of new companies
the registration of documents required to be delivered under companies,
insolvency and related legislation
the provision of company information to the public
dissolution and striking off companies from the register
ensuring that companies comply with their obligations in connection
with the above functions.
As registered at Companies House. Only one company can hold this name at any one
time. A company can change it's name at any time, unlike it's number which is
permanent.
A CCJ is an order from a County Court that the company must pay an outstanding
debt.
When settling debts companies often overlook notifying the court
so a judgement may appear unsettled when the debt has actually been paid.
An individual or organisation to which the company owes money - most commonly
a supplier.
The Current Assets divided by Current Liabilities. If greater than 1 then assets
are greater than liabilities, less than 1 then liabilities are greater than assets.
A very useful indicator, especially of cash flow. See also Liquidity Ratio.
D
A security issued by a company on which the interest is payable whether or not
the company makes a profit. Companies issue securities in order to raise capital.
The loan is usually secured by the general credit worthiness of the company rather
than any specific item.
An individual or organisation that owes the company money. This sum of these figures
is counted as a current asset.
Monies paid out to shareholders.
Directors are officers of the company and manage it in behalf of the shareholders.
Every company must have at least one director. The secretary may be a director
but not the sole director.
Once a company is struck off the Companies Register it ceases to exist and is
dissolved. The company will be dissolved when the Registrar publishes a notice
to that effect in the London Gazette. At the time of striking off a letter will
be issued to the contact name on Form 652a confirming the proposed date of dissolution.
A company is dormant during a period if it has had no “significant accounting
transactions” during the period, (ie transactions which are required to be
entered into its accounting records).
Many dormant companies may pass a special resolution exempting
themselves from the need to have their accounts audited, and from the duty to
appoint auditors.
A dormant company is not exempt from filing accounts but the accounts
to be filed are much simpler than for a trading company.
E
An individual who works for the company directly. Not a contractor or free-lancer.
Companies incur PAYE and National Insurance liabilities on behalf of their employees.
G
Usually expressed as a percentage, it is the ratio of borrowings to shareholders
funds. If over 100% then total borrowings are greater than shareholders funds
and the company would be vulnerable to interest rate rises.
I
The day Companies House recognised the company's existence and issued a Certificate
of Incorporation - in effect the company's 'birth certificate'. All transactions
conducted from this day forwards qualify the owners for limited liability.
Assets which have no material existence i.e. goodwill.
The amount of a company's share capital that has been issued to members/shareholders.
L
The process of turning all of a company's assets into cash, usually done in order
to pay off liabilities.
Current Assets, less Stock, divided by Current Liabilities. Because stock, which
can be hard to liquidate or overstated in the accounts, is removed from the equation
this is a more testing index than Current Ratio.
M
A mortgage is a secured charge for which the lender has stipulated property (real
estate) as security.
N
The total share capital that could be inverted into the company by its owners.
O
Short term outstanding amount on the current account at the bank. A current liability.
P
A public limited company is a company which is registered as such and complies
with the following:
it must state that it is a public limited company both in its
memorandum and in its name. The memorandum must contain a clause stating that
it is a public limited company and the name must end with "Public Limited
Company" or "PLC" (or the Welsh equivalents "Cwmni Cyfyngedig
Cyhoeddus” or "CCC").
the memorandum must be in the form specified in Table F of the
Companies (Tables A to F) Regulations 1985, or as near to that form as circumstances
permits.
it must have an authorised share capital of at least £50,000.
before it can commence business, it must have allotted shares
to the value of at least £50,000 a quarter of which, £12,500, must
be paid up in cash. Each share allotted must be paid up to at least one quarter
of its nominal value together with the whole of any premium.
Companies House regulations regarding PLCs are more stringent
than for other limited companies. In particular a PLC has only seven months from
year end to file accounts. Private companies have 10 months.
PLC has access to capital markets and can offer its shares for
sale to the public through a recognised Stock Exchange, and can issue advertisements
offering any of its securities for sale to the public. In contrast a private company
may not offer to the public any shares in that company.
However there is no requirement for a PLC to have stock market
listing.
The residue (or loss) after all expenses (wages, rent, raw materials etc) have
been subtracted from turnover.
The P&L deals with sales, cost of sales, and the profit & loss a company
has made in a period of time, usually a financial year.
The ratio by which a company's income exceeds its outgoings. A company that spends
£1000 on goods and sells them for £1200 is making a 20% profit margin.
R
A person appointed to collect and manage the assets of a company, or partnership
in serious financial difficulties. In the case of bankruptcy, the assets may be
sold and distributed by a receiver to creditors.
A company in the hands of the receiver is in receivership.
The legal address of the company as recorded at Companies House. An appointed
representative of the company should always be available here to receive mail.
May be the main trading address of the company or could be the address of the
company's accountants, solicitors or associated company. Must be an address in
the UK.
S
The name of the person responsible for maintaining company records and minutes
of board meetings. Every company must have a named company secretary who can be
a person or another company. The secretary may be a director but not the sole
director.
A US Standard Industrial Classification code. An aid to marketing applications
by identifying the subject business activities as a code.
The part of the capital of a company held by a member (shareholder). Shares may
be numbered and are issued as units of definite face value; shareholders are not
always called on to pay the full face value of their shares, though they bind
themselves to do so.
These are the owners of the company. Shareholders can be people or other companies
or businesses. Companies House uses the more official term 'member'.
Take Current Liabilities and Long Term, Liabilities FROM Total Assets to establish
what is left, and this residue belongs to the owners.
The process of removing a company from the Companies Register as held at Companies
House.
This can either be requested by the company itself, or initiated
by Companies House themselves. The most common cause is non-filing of accounts
and lack of response from mail sent by Companies House.
Goods owned by the company, usually raw material for the manufacturing process.
Stock is a current asset.
T
Assets which can be realised for cash after one year i.e. material goods such
as Fixtures & Fittings or property.
An address of business premises of a company. This is not always available as
the company is not required by law to file this information. This may or may not
be a different address to the Registered Office.
Total invoiced sales net of VAT.
Value Added Tax is a sales tax set at 17.5% of value within the UK. Most goods
and services supplied within the UK are liable to VAT.
Companies must charge VAT when supplying within the UK. A company
that is VAT registered may reclaim VAT on purchases.
There is no VAT on exports beyond the UK.
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