To begin with a micro-entity is basically a very small company. This is defined as a company with an annual turnover of no more than £632,000 and a balance sheet total of no more than £316,000. In addition to this the company must have a maximum of ten employees or less. Well, when I say must …. only two of the three criteria need to be met to qualify as a micro-entity.
The UK Government appreciates that in the majority of instances micro companies are owner-managed and do not have a separate shareholder and management relationship when it comes to communicating the company’s financial performance. As such it stands to reason that the burden of preparing a comprehensive set of accounts may be unsuitable and considered disproportionate when compared to other larger companies.
This is exactly why the micro-entity regime began. This new company classification aims to reduce the time and cost of meeting company statutory reporting requirements by:
1. Allowing a far more simplified format of company accounts, containing fewer elements;
2. Simplifying the accounting standards that should be applied.
So, as we mention in point 1 above micro-entity accounts are a far more simplified format of accounts that contain far less information. These are in simple terms a summarised balance sheet only. The full contents of micro-entity accounts are:
• Simple balance sheet and footnotes;
• Signature of a director and name printed at the bottom of the balance sheet;
• Statement on the balance sheet above the director’s signature that the accounts have been prepared in accordance with the micro-entity provisions.
What are the main benefits of micro-entity accounts?
• Highly simplified presentation of the balance sheet with very little detail required.
• No requirement to file a profit and loss account for the public record.
• No requirements to file an auditor’s report.
• With less disclosure required for the public record, less company information will be available to competitors.
Should you need any further help or guidance with your company statutory accounts then feel free to email one of our cheap accountants who will be very happy to assist you with all your accounting needs.