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
Replies (3)
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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.
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.