This guide will help you to correctly input the company’s balance sheet details. Using these details Inform Direct will automatically compile a compliant micro-entity balance sheet. The balance sheet summarises the company’s financial position as at a particular date – the balance sheet date.  

The easy to follow process to file Micro-Entity accounts is available in the Inform Direct software. To get started see informdirect.co.uk


Note: This guide does not seek to offer advice on selection or implementation of accounting policy. Please refer directly to ‘FRS 105 The Financial Reporting Standard applicable to the Micro-entities Regime’ or seek professional accounting advice.


1. Check the currency  

Inform Direct will automatically select the currency to apply to the balance sheet based on the currency that the company’s share capital is denominated in. However, you can use the dropdown box provided to change this if required:  



2. Don’t forget to enter comparative values

Unless the company was incorporated within the last 18 months and this is the company’s first set of financial statements, you should be entering values for both the current period and the previous financial period. However, if you used Inform Direct to submit your micro-entity accounts last year you will find that Inform Direct has retrieved the prior period values for you and there is no need for you to manually enter them.  


Remember, if you have previously prepared small company accounts under the provisions of FRS 102 and this is the first time you are preparing micro-entity accounts, you may need to restate some of your comparative values for accounting treatments that can't be applied under FRS 105. FRS 105 is the financial reporting standard that you must use when preparing micro-entity accounts. You may wish to consult our guide on the key differences between FRS 102 and FRS 105 and the process of transitioning to micro-entity accounts.


3. Enter the company's assets

Assets are items or resources that the company owns that have a future economic value. Broadly, assets can be defined as:  

  • Fixed assets: longer term assets that will be retained for a year or more; and 
  • Current assets: assets that will convert more speedily into cash.  


When you are entering the company’s assets into Inform Direct you should enter them as positive values. The screenshot below shows the different types of fixed and current assets that you should enter amounts for (where applicable):  


 


  • Called up share capital not paid: usually the nominal or face value of any shares that the company has issued to shareholders for which they have not yet received any payment in return. This amount is treated as an asset as it represents payments that are due to the company. 


  • Fixed assets: the value of assets that have been acquired for long term use in the business. You should include the value of tangible assets such as:  
    • Land and buildings;  
    • Furniture and other fixtures;  
    • Equipment and machinery;  
    • Motor vehicles; and  
    • Computers.  


Note: FRS 105 (which defines the accounting rules to apply when preparing micro-entity accounts) does not allow the revaluation of fixed assets or valuation at ‘fair value’. Fixed assets must be valued at historic cost (the purchase price) less any depreciation of the asset over its useful life.  


You may also be able to include the value of intangible assets such as goodwill, patents and trademarks.  


Current assets:  You should allocate the company’s current assets into one of the following classifications:  

  • Stock: the value of goods bought or made for resale but which remain unsold as at the balance sheet date. If your company sells services rather than goods you should not enter an amount into this field. 
  • Debtors: the amount owed to the company as a result of trading activity. This could consist of the following components:  
    • Trade debtors: the amount owed by customers for goods and services that the company has provided them with by the balance sheet date.  
    • Other debtors: the total value of amounts owed to the company that do not directly relate to sales. This will often include items such as the balance of any directors’ loan accounts repayable to the company and refunds due from HMRC.  

  • Prepayments: the total value of goods and services that the company has paid for but has yet to receive as at the balance sheet date. For example, it could include an insurance premium paid a year in advance with six months still to run (in which case half of the premium paid would represent a prepayment) or the value of rent paid three months in advance. 

  • Accrued income: the total value of income earned by the company but not yet received as at the balance sheet date. This could relate to goods delivered to the customer but not yet invoiced (if it has been invoiced it will be treated as a trade debtor). It could also include the value of interest earned on an investment during the accounting period but not received as at the balance sheet date.

  • Cash at bank and in hand: the value of any positive bank account balance plus any cash held as at the balance sheet date. If the company  has a positive deposit account balance but an overdraft on the current account, the two balances should not be netted off against each other. Instead the value of the positive deposit account should be included as an asset whilst the overdraft should be shown as a current liability loan.


4. Enter the company's liabilities

Broadly, liabilities are any debts or obligations the company has to other parties as at the balance sheet date. Liabilities can be split into:  


  • Current liabilities: amounts owing that the company expects to settle within 12 months of the balance sheet date; and 
  • Long term liabilities: amounts that the company expects to repay more than 12 months after the balance sheet date. 


When you are entering the company’s liabilities into Inform Direct you should enter them as positive values. They will be automatically deducted from the company’s assets to reach the correct balance sheet total. 


The screenshot below shows the different types of current and long term liabilities that you should enter amounts for (where applicable):  



Current liabilities: You should allocate the company’s current liabilities into one of the following classifications:  

  • Trade creditors: the value of goods and services received by the company from suppliers which have been invoiced but not yet paid as at the balance sheet date. 

  • Accruals: the value of goods and services used by the company but for which invoices have not yet been received. For example, this could include electricity used in the last quarter but not yet billed, or repair work carried out to the factory site but not yet invoiced by the builder.

  • Deferred income: the total amount of any monies received by the company for goods and services that the company has not yet provided as at the balance sheet date. This will usually be the total value of any deposits or payments on account. 

  • Loans: this should be the total value of loans repayable within a year of the balance sheet date. This usually includes the current account overdraft balance and any directors’ loans to the company.

  • Tax creditors: the value of tax payments still due for the accounting period. This will include amounts relating to corporation tax, VAT, PAYE and National Insurance.


Long term liabilities: The company’s long term liabilities should fall into one of the following categories:  

  • Amounts falling due after more than one year:  the total of amounts owed by the company that are repayable more than one year after the balance sheet date. 

  • Provision for liabilities: an estimate of the value of future payments where the amount due or the timing is uncertain. This could include: 

    • liabilities arising from a legal or constructive obligation; 

    • warranty obligations;  

    • a legal duty to clean up contaminated land or restore rental facilities to a pre-occupation state; or 

    • any obligation contained in the terms of service of the company to make refunds to customers.  

  • Accruals and deferred income: the value of goods and services used by the company but for which invoices have not yet been received


    5. Enter the company's capital and reserves

This section of the balance sheet relates to how the company is funded. You should allocate the company’s capital and reserves into the following categories (as appropriate):  

  • Share capital: the total nominal or face value of shares that the company has issued to shareholders. For example, if the company has issued 1000 £1 ordinary shares then the value entered as share capital would be £1,000.

  • Share premium: if any of the shares were issued at a price greater than the nominal or face value, the excess payment received should  be classified as share premium. For example, if the company has issued 1000 £1 ordinary shares at an issue price of £10 each, then the total value to enter as share premium will be £9,000.

  • Profit and loss account: the value of the accumulated profits or earnings of the company over its lifetime.

  • Other reserves: the total value of any other reserves not already included on the balance sheet. For example, this may include (among others) a capital redemption reserve (following a company purchase of own shares) or a currency translation reserve.


6. Ensure that the balance sheet balances

The balance sheet must balance. It is balanced when: 


Net assets/(liabilities) = Capital and reserves


  • Net assets/(liabilities): the total of fixed and current assets less the total of current and long term liabilities. 
  • Capital and reserves: generally the total value of any investments in the business plus the net profit the company has accumulated from its trading activities. 



  

How does Inform Direct help me to get the balance sheet right first time?

Every year Companies House reject tens of thousands of sets of accounts due to simple errors or omissions, often involving the balance sheet. The most common errors include:  

  • Failure to include the balance sheet date.  
  • Incorrect or duplicate balance sheet date.  
  • Name of director signatory missing from the balance sheet. 
  • Omission of the balance sheet approval date.  
  • Missing figures on the balance sheet and errors in calculation that mean the balance sheet doesn’t balance.  
  • Incorrect statements at the foot of the balance sheet.  


By using Inform Direct to prepare and file your micro-entity accounts you will benefit from the checks we have built into our software that help you to avoid all of the above errors.