An annual financial statement is an essential document that provides an overview of a company’s financial position over a specific fiscal year. This document consists of a balance sheet, a profit and loss statement, and explanatory notes. For many businesses, preparing and filing an annual financial statement is a legal requirement. In this article, you’ll learn what an annual financial statement entails, who is required to submit it, and how to prepare one.
What Does an Annual Financial Statement Include?
An annual financial statement consists of three main components:
- Balance Sheet: The balance sheet provides an overview of the company’s assets and how they are financed. It can be prepared at any point in the year, showing the company’s assets and liabilities. Balance sheet items typically include fixed assets, financial assets, current assets, short- and long-term liabilities, and provisions. With this information, you get a clear picture of what the business owns and what it still owes.
- Profit and Loss Statement: As the name suggests, the profit and loss statement shows the income and expenses throughout the year.
- Explanatory Notes: The explanatory notes provide details and additional information about the figures. For example, you can include descriptions of how specific items were calculated.
Who is Required to Submit an Annual Financial Statement?
Not every company is required to file an annual financial statement. This depends on the legal structure and size of the business. The following organizations are required to file their annual financial statements with the Chamber of Commerce (KvK):
- Private Limited Companies (BVs)
- Public Limited Companies (NVs)
- Cooperatives and mutual insurance societies
- Large associations and foundations with an annual turnover exceeding €6 million
- General Partnerships (VOFs)
Smaller businesses, such as sole proprietorships, do not have to file their annual financial statements, but they are still required to prepare a balance sheet and profit and loss statement annually for their own records and tax filings.
How Do You Prepare an Annual Financial Statement?
Preparing an annual financial statement can be challenging, especially if you have no experience with financial reporting. Hiring an accounting expert can be helpful, though some entrepreneurs handle it themselves. Here are the steps:
- Gather all financial data, such as invoices, receipts, and bank statements.
- Prepare the balance sheet and categorize assets and liabilities.
- Calculate your income, and expenses, and create the final profit or loss statement.
- Add explanatory notes to clarify important figures.
Prepare It Yourself or Outsource?
Whether you prepare the annual financial statement yourself or outsource it depends on your knowledge and the complexity of your business. Small companies might choose to prepare it themselves, while larger or more complex businesses are advised to consult a specialist to avoid errors and save time.
An annual financial statement is not only a legal requirement for many businesses but also an important document that provides insight into the financial health of your company. Additionally, a well-prepared annual financial statement is functional, as it serves as the basis for the subsequent income tax filing. Therefore, this must be done accurately and completely. Easily schedule a consultation with one of our specialists to discover how we can support you.
