Accounts and bookkeeping: the basics

A balance sheet provides a summary of what your business owes and owns, how it is being funded and how funds are being used. Limited companies and limited liability partnerships need to produce a balance sheet as part of their annual accounts submission.

A profit and loss account summarises transactions over a given period and shows the bottom line - whether your business made a profit or loss. Limited companies and partnerships whose members are limited companies must produce a profit and loss account for each financial year.

Sole traders and partnerships also need to keep adequate records to allow them to complete their self assessment tax returns, but don't need to create formal profit and loss accounts.

Record keeping systems can help your business run more efficiently, help you budget effectively and give you confidence that you are paying the correct amount of tax. They can also help convince banks and other sources of funding that your business is sound