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The Final Accounts report for micro-entities

This article explains how to access and interact with the Final Accounts (FRS 105 micro-entity accounts) report for limited companies in FreeAgent.

What is the Final Accounts report?

The Final Accounts (FRS 105 micro-entity accounts) report is prepared according to the financial reporting standard for companies that meet HMRC’s definition of a ‘micro-entity’. This is a limited company that meets two or more of the following criteria during a particular accounting year:

  • A turnover of £632,000 or less.
  • A balance sheet total of £316,000 or less (meaning the total of the fixed and current assets).
  • Fewer than 10 employees.

In FreeAgent, the report is available in limited company accounts to users with full (level 8) access. The report is automatically populated with data based on the transactions that you enter throughout the year. Companies that meet HMRC’s definition of a micro-entity can use this report to help prepare their accounts in order to submit their annual accounts to Companies House and HMRC.

Viewing the report

To find your Final Accounts report, navigate to the ‘Accounting’ tab at the top of your screen and choose ‘Reports’ from the drop-down menu.

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Choose ‘Final Accounts’ from the ‘High Level’ area.

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Select the relevant accounting year from the list.

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You will then see your Final Accounts report for the accounting year you selected.

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The report will display your Income Statement and balance sheet figures and will be marked as ‘Draft’. This is because the necessary notes to the accounts need to be added before the report can be finalised.

Interacting with the report

You can select each item highlighted in blue on the left-hand side of the report to view more detail. Selecting a category beneath an expanded row will also take you to the Show Transactions report, which includes even more detail.

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Short-term and long-term liabilities

Short-term liabilities are liabilities which are due within one year. Long-term liabilities are liabilities due after more than one year.

When you record a liability in FreeAgent, it is automatically recorded as a short-term liability.

If you need to allocate some of the total liabilities in your Final Accounts report as long-term liabilities, you will need to post journal entries between categories '794 - Liabilities < 1 Year' and '795 - Liabilities > 1 Year'. If you're unsure which journal entries to post, please ask an accountant.

In your Final Accounts report, short-term liabilities will be displayed under ‘Creditors: amounts falling due within one year’ and long-term liabilities will be displayed under 'Creditors: amounts falling due after more than one year'.

Please note that you will need to post further journal entries in future years to adjust the short-term and long-term liabilities.

How to export the report

To export the Final Accounts report as a PDF or iXBRL, select ‘Export Report’ in the top-right of the screen and choose the relevant option from the drop-down menu.

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Finalising the report before filing

Before you can begin filing your annual accounts, you'll need to add notes to your Final Accounts report in order to finalise it. 

Adding a required note for the average number of employees

The notes to a micro-entity’s financial statements must include the average number of people employed by the micro-entity in the accounting year.

Calculating the average number of employees

To calculate the average number of employees, follow the guidance in Section 382(6) of the Companies Act 2006.

If you’re unsure of how to calculate the average number of employees, please check with an accountant before filing your annual accounts with Companies House.

Adding the required note

To add the required note, select ‘Manage notes and settings’ at the top-right of your Final Accounts report.

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In the ‘Required notes’ section, enter the average number of employees employed by the micro-entity during the accounting year in the ‘Employee average’ field.

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Once you’ve entered the required note, select ‘Save changes’ at the bottom of the screen to complete the process.

Additional notes to the accounts

On some occasions, you may need to fill in the other optional notes before submitting your annual accounts with Companies House. If you're unsure whether additional notes are applicable to your company, please speak to an accountant.

If applicable to your company, enter information for the following sections:

‘Capital Commitments Note’

Capital commitments apply if the company has committed to an investment that isn’t yet shown on the balance sheet.

‘Contingent Liabilities Note’

Contingent liabilities are less certain than capital or financial commitments, or can’t yet be quantified. 

‘Director Advances Credits Note’

If the company has given loans to one of its directors, then that needs to be reflected as a ‘director advances credits’, and include details such as the amount of the advance and any interest due.

The required details are:

(a) the amount of advance or credit

(b) an indication of the interest rate

(c) the main conditions of the advance or credit

(d) any amounts that have been repaid

(e) any amounts that have been written off

(f) any amounts that have been waived

‘Director Guarantees Note’

If a director has given a personal guarantee to repay money lent to the company that the company can’t repay, then this needs to be included in the notes to the accounts.

The required details required are:

(a) the main terms of the guarantee

(b) the amount of the maximum liability that may be incurred by a micro-entity

(c) any amount that has been paid and any liability incurred by a micro-entity for the purpose of fulfilling the guarantee (including any loss incurred by reason of enforcement of the guarantee)

‘Financial Commitments Note’

If, during a reporting period, a company is, or has been, ‘party to arrangements that are not yet reflected in its balance sheet', you will need to include details of this in the notes to the accounts.

Adding the additional notes to the accounts

If you need to include any of the notes listed above, select ‘Manage notes and settings’ in the top-right of your Final Accounts report.

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Scroll to the ‘Other notes’ section.

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Once you’ve entered the information required for the relevant notes, select ‘Save changes’ at the bottom of the screen to complete the process.

If you’re unsure whether you need to enter any additional notes, please check with your accountant before filing your annual accounts with Companies House.

Including comparative values

When you submit your Final Accounts with Companies House you will need to include your comparative figures from the previous year along with your current accounting year.

If you have an existing business and you started using FreeAgent from your second year of trading or later, you’ll need to enter your comparative values into your Final Accounts report.

To do this, select ‘Manage notes and settings’ at the top right of your Final Accounts report.

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Select the ‘Previous year’ tab and enter the required information, including any relevant ‘Required notes’ for the previous year at the bottom of the page. You’ll be able to obtain these figures from your company’s previous accounts, and your accountant will be able to help you fill in the boxes.

Please note that these figures will not pull through automatically from the opening balances that you entered into FreeAgent since the opening balances may not be for the same dates as your comparative figures. 

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The fields will indicate whether you need to enter a positive or negative value.

To ensure that your balance sheet will balance, FreeAgent will add a balancing figure to ‘Capital & Reserves’. Once you’ve entered all the required information, select ‘Save changes’ at the bottom of the screen to complete the process.

Please note that you will not see the option to enter comparative values if you started using FreeAgent from your first year of trading.

Checking your figures

Navigate back to the Final Accounts report and check your comparative figures against your previous accounts to ensure they match, particularly the balancing figure for ‘Capital & Reserves’, which FreeAgent will work out automatically.

Once you’ve added the required notes and comparative values (if required), you’ll be ready to file your End of Year accounts.

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