How to Read Company Accounts
Every limited company in the UK files accounts at Companies House. Here is what those numbers actually mean, explained without the jargon.
Who files accounts and when
Every limited company registered at Companies House must file annual accounts. It does not matter whether the company has one employee or ten thousand. If it is a limited company, it files.
The deadlines depend on the size of the company:
Small and micro companies
9 months after the accounting period ends. Most small companies have a year-end of 31 March or 31 December.
Medium and large companies
6 months after the accounting period ends. These companies also file more detailed accounts.
A company's first accounts have slightly longer deadlines: 21 months from incorporation for private companies, 18 months for public companies.
Types of accounts
Not all accounts show the same level of detail. Smaller companies are entitled to file less information, which means what you can learn from the accounts depends on the type filed.
Micro entity accounts
The bare minimum. A very short balance sheet with no notes, no profit and loss statement, and no director's report. Companies qualify if they meet two of three conditions: turnover under £632,000, balance sheet total under £316,000, or fewer than 10 employees.
What you can see: Total assets, total liabilities, net assets. That is essentially it.
Small company accounts
More detail than micro, but still no profit and loss filed at Companies House. Includes a balance sheet with notes and an accounting policies section. Companies qualify if they meet two of three: turnover under £10.2 million, balance sheet total under £5.1 million, or fewer than 50 employees.
What you can see: Balance sheet, creditors breakdown, accounting policies, some notes on assets and liabilities.
Full accounts
The complete picture. Includes a profit and loss statement, balance sheet, cash flow statement, director's report, and detailed notes. Required for medium and large companies, or any company that chooses to file them voluntarily.
What you can see: Everything — turnover, costs, profit, directors' pay, employee numbers, borrowings, the lot.
The balance sheet explained
The balance sheet is a snapshot of what the company owns and owes on a single date — the last day of the accounting period. It always balances: assets minus liabilities equals shareholders' funds (also called net assets or equity).
Fixed assets
Things the company owns and plans to keep for more than a year. Property, vehicles, equipment, and machinery all sit here. So does goodwill if the company has bought another business. Fixed assets are shown at cost minus depreciation — their value on the books decreases over time.
Current assets
Short-term assets that will be used or converted to cash within a year. This includes cash at the bank, money owed by customers (debtors or trade receivables), and stock (inventory). Current assets are the company's working capital — the fuel that keeps the engine running day to day.
Current liabilities
Money the company owes and must pay within a year. Trade creditors (suppliers waiting to be paid), tax owed to HMRC, bank overdrafts, and the current portion of any loans. If current liabilities exceed current assets, the company may struggle to pay its bills on time.
Long-term liabilities
Debts due after more than a year. Mortgages, long-term loans, and hire purchase agreements typically appear here. Not every company has these.
Net assets
The bottom line. Total assets minus total liabilities. This is what would theoretically be left if the company sold everything and paid off all its debts. A positive number means the company is solvent. A negative number — shown as net liabilities — means the company owes more than it owns, which is a significant warning sign.
Profit and loss statement
Only available in full accounts. The profit and loss (P&L) shows what the company earned and spent over the accounting period. Small and micro companies do not have to file this at Companies House, so for most small businesses you will only see the balance sheet.
| Line item | What it means |
|---|---|
| Turnover | Total revenue from sales, before any costs are deducted. |
| Cost of sales | Direct costs of delivering the product or service — materials, manufacturing, subcontractors. |
| Gross profit | Turnover minus cost of sales. Shows the margin before overheads. |
| Administrative expenses | Overheads: rent, salaries, insurance, professional fees, software. |
| Operating profit | Gross profit minus administrative expenses. The profit from normal trading. |
| Net profit (or loss) | The final figure after interest and tax. What the company actually made (or lost). |
What to look for
You do not need to be an accountant to spot warning signs or positive signals. Here are the key things to check when reviewing company accounts.
Are net assets positive or negative?
Negative net assets means the company owes more than it owns. In accounting terms, this is technical insolvency. It does not necessarily mean the company is about to collapse — many businesses trade through periods of negative net assets — but it is a red flag that warrants further investigation.
Are debtors growing faster than turnover?
If the amount owed by customers is increasing year on year but revenue is flat or falling, the company may have a cash flow problem. It is making sales but not collecting the money. This is only visible in full accounts where turnover is disclosed.
Is borrowing increasing each year?
Growing debt is not automatically bad — companies borrow to invest. But if liabilities are rising and net assets are falling, the company may be borrowing to cover losses rather than to grow. Compare the trend over two or three years if the filings are available.
Directors' remuneration
Only disclosed in full accounts. Shows the total paid to directors including salary, benefits, and pension contributions. Worth checking to see how much of the company's profit (or loss) is going to the people running it. In small company accounts, this information is not filed.
Dormant accounts
Some companies file dormant accounts. This means the company exists on the register but has had no significant accounting transactions during the period. It is not trading.
Companies go dormant for various reasons: the owner is keeping the company name reserved, the business is seasonal and paused, or the company was set up for a future project that has not started yet. Dormant accounts are typically a single page confirming no activity. The company must still file a confirmation statement each year to stay on the register.
Where to find company accounts
All accounts filed by UK limited companies are public documents. Anyone can access them.
Companies House — the official source. Search at find-and-update.company-information.service.gov.uk and view or download filings for free.
Financial Pages — search for any UK company and see key financial data, director information, and a health score alongside the accounts, all in one place.
Look up a company's filings
Search over 5 million UK companies. View accounts, check directors, and see our plain English health score.
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