How to Prepare Your First Set of Company Accounts

If you have recently incorporated a company, preparing your first set of accounts is one of the milestones that catches many new business owners off guard. Unlike sole traders who report their income on a personal tax return, companies are separate legal entities with their own reporting obligations. You must prepare formal financial statements, file them with the relevant authorities, and pay any tax due — all within specific deadlines.

The process is not as complicated as it first appears, especially if you have maintained your financial records properly during the year. This guide walks you through what to expect and how to prepare.

What company accounts include

Your annual company accounts typically consist of:

Profit and loss statement (income statement)

This shows your company's revenue, expenses, and resulting profit or loss for the financial year. It tells stakeholders how the business performed during the period.

Balance sheet

This shows your company's financial position at the year-end date — what it owns (assets), what it owes (liabilities), and the net value belonging to shareholders (equity). The balance sheet must be signed by a director.

Notes to the accounts

These provide additional detail and context for the figures in the main statements. Common notes cover accounting policies, fixed assets, debtors and creditors, and director transactions.

Director's report (where required)

Depending on your jurisdiction and company size, you may need to include a report from the directors covering the company's activities, future outlook, and other statutory disclosures.

Audit report (where required)

Larger companies require an independent audit. Most small companies qualify for audit exemption, but if yours does not, an auditor's report will accompany the accounts.

Your first accounting period

When it starts

Your first accounting period begins on the date of incorporation and ends on your chosen financial year-end date. This first period can be longer or shorter than twelve months depending on when you incorporated relative to your chosen year-end.

For example, if you incorporate on 15 March and choose 31 March as your year-end, your first accounting period is just 16 days. Most businesses in this situation extend their first period to end on 31 March of the following year, making it approximately twelve and a half months.

Choosing your year-end

You can choose any date as your financial year-end. Common choices include:

31 March or 5 April — Aligns with the tax year in some jurisdictions
31 December — Aligns with the calendar year
A date that suits your business — Some businesses choose a year-end during a quiet period when closing the books is less disruptive

Your accountant can advise on the most tax-efficient year-end for your situation.

Filing deadlines

Deadlines vary by jurisdiction, but common requirements include:

Annual accounts filed with the company registrar within a specified period after year-end (often nine months for private companies)
Corporation tax return filed with the tax authority within a specified period (often twelve months after year-end)
Corporation tax payment due within a specified period (often nine months and one day after year-end)

Missing these deadlines results in penalties that escalate the longer you are late. Mark them in your calendar well in advance.

Preparing your accounts: step by step

Step 1: Ensure your records are complete

Before you can prepare accounts, your underlying records must be complete and accurate:

All sales invoices issued and recorded
All purchase invoices entered
All bank accounts reconciled to the year-end date
All expense claims processed
All journal entries posted (depreciation, accruals, prepayments)

If you have been maintaining your accounting software throughout the year, this should be a matter of reviewing and tidying rather than reconstructing.

Step 2: Review your trial balance

Run a trial balance from your accounting software. This lists every account with its balance. Check for:

The trial balance should balance (total debits equal total credits)
Bank balances should match bank statements
No accounts with unexpected or impossible balances
Suspense accounts should be cleared
Tax accounts should reflect what has been filed and paid

Step 3: Post year-end adjustments

Common year-end adjustments include:

Depreciation — Ensure the full year's depreciation has been charged on all fixed assets.

Accruals — Record expenses incurred but not yet invoiced. If your accountant will send their bill after year-end for work done during the year, accrue it.

Prepayments — If you have paid for services that extend beyond your year-end (such as annual insurance), move the portion relating to next year to a prepayment account.

Bad debt provisions — Review outstanding receivables and provide for any that may not be collected.

Stock or inventory — If you hold stock, count it and value it at the lower of cost or net realisable value.

Corporation tax — Estimate the tax due on the year's profits and record the provision.

Step 4: Prepare the financial statements

Using the adjusted trial balance, prepare or generate:

Profit and loss statement for the period
Balance sheet as at the year-end date
Notes to the accounts

Your accounting software should generate the P&L and balance sheet directly. The notes may require additional manual preparation or input from your accountant.

Step 5: Review with your accountant

If you work with an accountant — which is strongly recommended for your first set of accounts — share your prepared records and draft accounts. Your accountant will:

Review the accounts for accuracy and compliance
Make any additional adjustments needed
Ensure the accounts meet the required accounting standards
Prepare them in the correct format for filing
Calculate the corporation tax liability

Step 6: File the accounts

Submit the accounts to the company registrar and file the corporation tax return with the tax authority. Your accountant typically handles both filings.

Step 7: Pay any tax due

Ensure corporation tax is paid before the deadline to avoid interest charges.

Common first-year issues

Director's loan account

If you have taken money out of the company beyond your salary and dividends, this creates a director's loan account. It needs proper treatment in the accounts and may have tax implications.

Personal expenses through the company

If any personal expenses have been paid by the company, these need to be identified and treated correctly — usually as director's drawings or benefits in kind.

Share capital

Your accounts need to reflect the share capital invested in the company. Even if this is a nominal amount (one pound or one dollar per share), it appears on the balance sheet.

Startup costs

Costs incurred before you started trading — such as legal fees, registration costs, and initial marketing — are legitimate business expenses that should be included in your accounts.

VAT or sales tax registration

If you registered for VAT or sales tax during the year, ensure your accounts correctly reflect tax collected and paid. The amounts in your accounts should reconcile with your filed tax returns.

Preparing for next year

Once your first accounts are done, set yourself up for a smoother process next year:

Maintain records throughout the year

Do not let bookkeeping pile up. Record transactions weekly, reconcile monthly, and review quarterly. By year-end, the accounts should be nearly ready rather than needing months of catch-up.

Save for tax

Once you know your first year's tax bill, set aside a similar proportion of profit each month going forward. This prevents a large tax bill from creating a cash flow crisis.

Close periods monthly

Lock each month in your accounting software once it is reviewed and finalised. This prevents accidental changes to historical records.

Communicate with your accountant

Do not wait until year-end to raise questions. If you are unsure how to handle a transaction, ask your accountant during the year rather than creating problems that need correcting later.

Choosing accounting software

If you have not yet set up accounting software, do so before your next financial year. The right software:

Generates the financial reports your accountant needs
Connects to your bank for automatic transaction import
Handles invoicing, bill management, and expense tracking
Provides your accountant with direct access

Relentify's accounting platform includes everything a new company needs — invoicing, expense management, bank reconciliation, and financial reporting — with accountant access that makes year-end collaboration efficient.

It gets easier

Your first set of company accounts is always the most challenging because everything is new. You are learning the process, establishing your record-keeping habits, and building a relationship with your accountant. From the second year onwards, you have a template, established processes, and experience. The effort invested in getting your first accounts right pays dividends in smoother, cheaper, and less stressful year-ends for years to come.