Legal Requirements on Accounts Preparation - Essay Example

Employees need to know the profitability of their company, its ability to remunerate them in the long term and to ensure their job security (Elliott, 2008).

LEGAL REQUIREMENTS ON ACCOUNTS PREPARATION
The accounts must be submitted to the tax authorities, and corporation tax should be on the basis of the company’s profits. This is done at the end of the financial year. The company’s accounts must be made public by filling them in the house of companies (Horngren, 2002). They must be submitted by the company within nine months after the financial year-end. The accounts must be accurate and directors have a legal responsibility of ensuring that the accounts are accurate. The use of an accountant does not reduce responsibility (Webster, 2004). The financial statements that must be prepared include; the balance sheet, profit and loss account, notes to the accounts, director’s report and auditor’s report. The balance sheet must be signed by the director, and a printed name of the director must be included (Horngren, 2002). The accounts should be prepared in conformity with internationally accepted financial reporting standards.

DIFFERENCES BETWEEN PARTNERSHIP AND SOLE TRADER ACCOUNTS

A sole trader’s earnings are subject to tax in the self-employment category while a partnership is subject to corporation tax (Elliott, 2008). The accounts of a sole trader seize to exist upon the death of the trader while those of a partnership continue to exist since it is a legal person. A partnership’s accounts contain capital comprised of shares of stock which are categorized into preference and ordinary shares (Webster, 2004). A sole trader’s account contains capital raised from other sources like personal savings or soft loans. The partnership has to file its legal accounts with the state while a sole trader’s account need not be filed with the state (Horngren, 2004). Sole trader accounts mostly include incomplete financial records while a partnership must prepare financial statements in conformity with the statutory requirements. The accounts of a sole trader are usually voluntarily prepared while those of a partnership is a statutory requirement. Read More