A sole director has been disqualified for seven years because he failed to maintain proper accounting records on behalf of the company. What financial information are you required to keep?

 

A lengthy ban. In January 2017 the Insolvency Service announced that a sole director called Mr Perfect (P) had been disqualified for seven years because he had failed to keep proper accounting records on behalf of his company, Northwich Cleaning Limited (N). In the absence of such records, it was not possible to determine the purpose of payments of £35,500 made to P or verify whether 83 cheque payments drawn from N’s bank account totalling £30,734 were for its benefit. Therefore, £66,234 of N’s money was not properly accounted for.

 

Breach of duty. Interestingly, P’s imperfect behaviour didn’t stretch over a number of years – his failure to keep proper accounting records on behalf of the company lasted just over six months. To comply with the proper accounting records requirements, directors must ensure that they keep clear details of: (1) all money that comes into and goes out of the company; (2) all assets owned by the company; (3) all debts owed by or to the company; (4) all goods bought by and sold to the company; (5)  the stock that the company owns at the end of the financial year; and (6) the stocktakings used to work out that stock figure.

 

Financial information. In addition, any other financial records, information and calculations needed to prepare and file the company’s annual accounts and tax return must be kept. This includes, but is not limited to: (1) details of all money spent by the company – this can be shown by receipts, purchase orders, delivery notes and petty cash books; (2) details of all money received by the company – this can be shown by sales books, invoices, contracts and till rolls; and (3) any other relevant documents, e.g. bank statements and correspondence.

 

Tip. As an absolute minimum, the company’s accounting records should be kept for six years from the end of the last financial year that they relate to.

 

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