Duty to Maintain Books of Account
Under the Companies Acts, your Irish company is required to maintain proper books of account. The directors of the company are required to ensure that this requirement is complied with.
- Correctly record and explain the transactions of the company
- At any time enable the financial position of the company to be determined with reasonable accuracy
- Enable the company’s directors to ensure that the balance sheet and profit and loss account comply with the Companies Acts
- Enable the accounts to be readily and properly audited
- Books of accounts must be kept on a continuous and consistent basis. That is to say the entries made in them must be made in a timely manner and be consistent from one year to the next
Section 202 of the Companies Act 1990 stipulates that the books of account must contain:
- Entries from day to day of all sums of money received and expended by the company and the matters in respect of which the receipts and expenditure take place
- A record of the company’s assets and liabilities
- If the company’s business involves dealing in goods – stocks
- A record of all goods purchased and sold (except those goods sold for cash by way of ordinary retail trade) showing the goods, sellers and buyers in sufficient detail to enable the goods, sellers and buyers to be identified and a record of all the invoices relating to such purchases and sales, and
- A statement of stock held by the company at the end of each financial year and all records of stock takes on which such statements are based
- Where the company’s business involves the provision of services, a record of the services provided and all the invoices relating to those services must be maintained
Duty to Prepare Annual Accounts
Companies are required to prepare accounts on an annual basis. Accounts must be prepared and laid before the members of the company. Accounts together with an auditors certificate (unless you qualify for audit exemption) have to be filed with the Companies Registration Office, and subsequently become available for public inspection. The level of information given in filed accounts varies with the size of the company and are prepared as small, medium, or large.
The annual accounts are prepared from the information contained in the company’s books of account and other relevant information. These accounts/financial statements are required to give a true and fair view of the company’s affairs, normally include the following, some of which are required by law and others of which are required by accounting standards:
- Profit and loss account: this records the income and expenditure of the company over a particular period and shows the profit or loss arising from the company’s activities
- Balance sheet: this is a statement of the company’s assets and liabilities at a given point in time
- Cash flow statement: this is a statement of the company’s cash inflows and outflows over a period of time. It is a requirement under accounting standards but is not required in the case of small companies
- Notes to the financial statements: these contain detailed information relating to the profit and loss account, balance sheet or cash flow statement e.g. analysis of fixed assets and depreciation
- Directors’ Report: The directors are required to annex a report to the accounts, known as a directors’ report. This is a report by the directors to the members of the company. It is required to address certain matters, namely – the state of the company’s affairs. The report should address any changes in the nature of the company’s business during the year.
The term “true and fair view” is not defined in law. However, it is generally accepted that a set of financial statements will give a true and fair view when they have been prepared in accordance with the provisions of the Companies Acts, and accounting standards issued by the Accounting Standards Board.
- A fair review of the development of the business during the financial year
- Particulars of any important events affecting the company which have occurred since the year end
- An indication of likely future developments in the business of the company
- An indication of the company’s activities, if any, in the area of research and development
- The amount, if any, that the directors recommend should be paid as a dividend
- The steps that the directors have taken to ensure compliance with the requirement for the company to maintain proper books of account
- The exact location of the books of accounts.