The annual accounts , also known as financial statements, financial reports or financial statements consist of reports used by the institutions to make public its economic and financial situation and the changes in a date or within a specific period. All these reports are part of the final accounting and are prepared according to accounting principles, accounting standards or financial information standards.
This requires the figure of public accountants, who usually must register with public or private control bodies to practice the profession. The information generated in the annual accounts is useful for the administration as well as shareholders, creditors and owners.
To present annual accounts, it is necessary to include the balance sheet , the profit and loss account, the statement of changes in equity and the memory . All this documentation must be presented in accordance with the Commercial Code, the Consolidated Text of the Public Limited Companies Law, the Limited Liability Companies Law and the General Accounting Plan for Small and Medium-sized Companies.
The balance
The balance sheet is a summary of the situation of the company, which contains the information related to assets and debts. It consists of assets and liabilities . Assets are the resources that the company has and are classified according to the possibility that they are made effective, that is, that they are converted into money.
The asset is divided into current and non-current. Current assets include cash and goods convertible into money in twelve months: money, balances, raw materials, stock, etc. Non-current assets, on the other hand, consist of assets and property rights of the company that can be converted into money in a period of more than one year: computers, machinery, buildings …
Liabilities, on the other hand, are the debts owed by the company, also divided into current and non-current liabilities. Current liabilities are those debts that have to be paid within a period of less than twelve months (debts with suppliers, salaries, expenses of the Social Security ) while non-current liabilities are loans for more than one year, such as acquisition debts. of assets.
The profit and loss account
The profit and loss account is a fundamental part of the annual accounts. It consists of the summary of all the income and all the expenses that an organization generates during an accounting year. The result for the year is the amount that a company has earned in a given period. Likewise, the operating result and the financial result allow an approximate analysis of the causes of this result.
Statement of changes in equity
The statement of changes in equity consists of all operations that affect equity, arising from the economic result of the year (with profit or loss), from operations attributed to equity or from operations carried out with the owners of capital (increases of capital or dividend distribution among others).
The ordinary model of the statement of changes in equity includes three fundamental components: the balance of the profit and loss account, the allocations to equity collected through the accounts and the operations with the partners that involve new funds. In the latter case, we could include capital increases that involve contributions from partners or contributions to offset losses.
Memory
The report is made to complete, expand and comment on the information contained in the documents that make up the annual accounts. It must be taken into account that the report contains the minimum information to be completed and any other information not included in the report model that is necessary to allow knowledge of the situation and activity of the company in the year must be indicated. Likewise, the qualitative information must refer to the year to which the annual accounts correspond and must affect everything established in the report to multi-group companies, adapted for presentation.
Types of annual accounts
There are different types of annual accounts. The abbreviated annual accounts, the normal annual accounts and the SMEs annual accounts.
Normal annual accounts
The normal annual accounts are included in RD 1514/2007, of November 16, which approves the General Accounting Plan. In principle, all companies are obliged to submit them, except those that have the right to present abbreviated annual accounts or those that can benefit from the General Accounting Plan for SMEs.
Abbreviated annual accounts
The abbreviated annual accounts differ from the normal annual accounts in their simplicity. The latter have a simpler format, where there is less disaggregation of the information; There are no special rules defined for this type of document. To be able to formulate the balance sheet, the report and the statement of changes in the net equity abbreviated the companies that during two consecutive years have, at the closing date of each of them, at least two of the following circumstances, included in article 49 of the Entrepreneurs Law:
- a) That the total of asset items does not exceed four million euros.
- b) That the net amount of its annual turnover does not exceed eight million euros.
- c) That the average number of workers employed during the year does not exceed fifty.
The profit and loss accounts may be presented in an abbreviated form as long as two of the following circumstances are met:
- a) That the total of asset items does not exceed eleven million four hundred thousand euros.
- b) That the net amount of its annual turnover does not exceed twenty-two million eight hundred thousand euros.
- c) That the average number of workers employed during the year does not exceed two hundred and fifty.
SME annual accounts
In order to present the SME model of annual accounts for both the balance sheet and the profit and loss account, companies that meet the following conditions:
- That the total of the asset items does not exceed 2,800,000 euros.
- That the net amount of its annual turnover does not exceed 5,700,000 euros.
- That the average number of workers employed during the year does not exceed 50.
This is the model most used by most small and medium-sized companies in Spain. It must be taken into account that the chosen formula must be maintained for at least three consecutive periods.
