Definition
Abbreviated Accounts (formerly known as modified accounts) are simplified versions of full statutory accounts that small companies can file to reduce the burden of financial reporting. These accounts contain a condensed version of the company’s financial information and are generally less detailed than full statutory accounts. The abbreviation in these accounts helps small enterprises lower both the administrative burden and costs associated with producing full financial statements.
Examples
- Balance Sheet Only: An abbreviated account might only include a balance sheet and not the profit and loss account.
- Partial Notes: A small company might provide fewer notes to the financial statements, offering a summary rather than exhaustive details.
- Exemption from Audit: Small companies may also be exempt from the audit requirement, which further simplifies the process.
Frequently Asked Questions
What types of companies are eligible to use abbreviated accounts?
Small companies that meet specific criteria, such as turnover, balance sheet total, and number of employees, may be eligible to file abbreviated accounts.
Are abbreviated accounts less reliable than full statutory accounts?
Abbreviated accounts are less detailed but do not inherently mean they are less reliable. They still provide a true and fair view of the company’s financial position, although in a more condensed form.
Do abbreviated accounts need to be audited?
Typically, small companies that choose to file abbreviated accounts are exempt from the requirement to have their accounts audited, provided they meet specific criteria.
What information is excluded in abbreviated accounts?
Abbreviated accounts generally exclude detailed income statements, certain notes, and may not include the comprehensive disclosures found in full statutory accounts.
Can shareholders still request full accounts?
Yes, shareholders have the right to request full statutory accounts even if the company files abbreviated accounts publically.
Related Terms with Definitions
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Statutory Accounts: Complete financial statements required by law that offer a comprehensive overview of a company’s financial position, including a balance sheet, profit and loss account, and detailed notes.
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Balance Sheet: A financial statement showing the assets, liabilities, and equity of a company at a specific point in time.
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Audit Exemption: A relief given to small companies from the requirement of having their financial statements audited.
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Disclosure: Information that must be provided in the financial statements or notes to conform with statutory requirements.
Online References to Resources
- UK Government - Companies House: Official guidance on filing company accounts, including abbreviated accounts.
- Institute of Chartered Accountants in England and Wales (ICAEW): Resources and guidance on financial reporting for small companies.
- Investopedia – Financial Statements: Educational articles explaining various types of financial statements.
Suggested Books for Further Studies
- “Financial Accounting: For Mbas” by Peter D. Easton: A comprehensive guide on financial accounting principles, including simplified account practices.
- “Intermediate Accounting” by Donald E. Kieso, Jerry J. Weygandt, and Terry D. Warfield: Detailed chapters on statutory and abbreviated accounts.
- “Accounting and Finance for Non-Specialists” by Peter Atrill and Eddie McLaney: An excellent resource for those who need an intro to financial reporting and accounting.
Accounting Basics: “Abbreviated Accounts” Fundamentals Quiz
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