ACCOUNTANCY

Understanding

your accounts

All businesses need to prepare accounts, and whilst accountants exist to make this necessity easier for clients, all too often we hear the phrase “I’ll just sign them, I don’t understand what I’m reading anyway”.

Nikki Cairns Client Director

There are some simple points, that when clarified, could help you to understand what you are signing. Business owners and managers should understand their financial picture in order that the information can be used to better plan for the future of the business through growth, succession, sale etc. These are as follows:

� Profit and Loss Account. This is a record of the income and expenses a business has incurred over a given time period, in the majority of cases this will be 12 months, and will show if there has been a profit or a loss made in that time.

In simple terms this is the revenue with the various costs subtracted, resulting in a net profit or loss. Most profit and loss accounts are initially compiled using the transactions that have gone through the business bank account. Other items are then also brought into the accounts in order to be compliant with accounting legislation such as movements in prepayments or accruals. These are items that may have been either paid for within the accounting period but relate to another period or have been incurred but not yet invoiced.

� Balance sheet. This is a snapshot in time of the assets and liabilities of the business as at the end of the period that the profit and loss account covers. Assets are items that benefit a company economically, such as inventory, buildings, equipment and cash. They help a business manufacture goods or provide services, now and in the future. Liabilities are a company’s obligations—either money owed or services not yet performed.

No matter your type of business entity, a set of accounts leads to a tax return and one of our most common questions is:

“Why do my accounts show a loss but the tax computation shows a profit?” The answer is differences between accounting and tax legislation and having to reconcile the two. Commonly this being depreciation and capital allowances.

For accounts purposes assets are depreciated over a number of years which is determined by the accountant or the client and different rates are normally applied to different types of assets, and will have an adjusted year on year economic benefit on the balance sheet.

However for tax, many assets qualify for allowances that mean they can be written off in full in their year of purchase or are subject to allowances that are at rates set by Government.

Accountants have studied for years to gain the level of understanding that we have and, the learning never ends. We know that it is a complex area of your business so a good accountant would never mind you asking questions about anything in your accounts.

Contact Nikki for more information by emailing Nicola.cairns@randallpayne.co.uk or call 01242 776000.

Tim Watkins celebrated 40 years with the firm in September.

Tim joined as a young trainee back in 1981 and eventually worked his way up to Managing Partner in 2015.

He explained: “Accountancy is in my blood. My father and uncle were both accountants and I followed Dad into Randall & Payne. He was a partner here when I joined and encouraged me over the years to keep training and passing those exams so I certainly owe him a lot.”

Much has changed to the accounting landscape with the sea change in technology happening during his time as Managing Partner, with the transition to cloud accounting, the introduction of Making Tax Digital and most recently the shift to remote working expedited by the pandemic. The team couldn’t let this monumental work anniversary go by without acknowledging it, even though Tim would have been happy to let it slip by! We marked the occasion with a surprise gathering with a few staff one lunch time with a glass of fizz and a slice of cake. Will Abbott said a few words and we raised a toast to Tim!

Smashing our fundraising target

for SCOO-B-DOO

After being extended due to the pandemic, December 2021 will mark the end of our charity partnership with Scoo-B-Doo who were voted for by our team in 2018.

With our pledge to raise £15,000 to buy an incubator for the neonatal unit at Gloucestershire Royal Hospital, and the hindrance of the pandemic, we extended our support for Scoo-BDoo for a further 18 months. We are delighted to announce we have now not only achieved our target but exceeded it having almost raised a staggering £18,000. A huge heart felt thank you to all our staff and their friends and families for their support. At the end of August we managed to get some of the team together for a charity rounders game with bar and BBQ hosted by our friends at the Hatherley & Reddings cricket club.

When it came to the individual challenges, one in particular stood out. Shelley from our Audit team took on a 7 hour running challenge dressed in a Scooby-Doo onesie! She ran over 30 miles on a ridiculously hot day in July raising an amazing £455 for our cause.

Our biggest fundraiser this year took place whilst working from home and many of us took on the Randall & Payne 10K active challenge and walked, ran, cycled and even rowed the distance, together clocking up close to 400km and raising over £1000.