Cash basis or accruals basis?

Cash basis or accruals basis?

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Should a limited company accounts be made up using cash basis accounting or accruals basis? I'm am unsure which concept to use as this is my first set of annual accounts which needs submitting to Companies House. The limited company falls under the small companies treshold.

Also if the company's accounts are made on either cash or accruals basis - does this mean i need to allow apply the same concept for my VAT return.

thanks

JDM

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Teignmouth
By Paul Scholes
21st Jan 2013 11:50

Accruals

Hi - at the moment (and since the dawn of time) Ltd company accounts have to be prepared on an accruals basis.  This may not be for much longer as it's anticipated that "Micro" companies may be entitled to use the cash basis in the future.

VAT is separate and so it's up to you, based on the cash basis criteria. Most small businesses selling on credit go for cash.

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By JDM
21st Jan 2013 11:59

Thanks Paul that was very helpful as my accounting software was defaulting to cash based.

May I also ask a quick question while we are here, I also seem to have a negative retained earnings figure at the bottom of the BS. Is this correct?

Thank You

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Teignmouth
By Paul Scholes
21st Jan 2013 12:20

Might be

If the business has made a loss (and it's the first year) then, yes, the balance sheet will show negative retained earnings.

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