Do you know when and why you need to create financial statements?
If you're in charge of your company's money, you have another task to accomplish or check from your list every year. According to the new Companies Act (2008), you must compile financial statements six months after your financial year end.
So if your company's financial year end is 28 February, you'll have to draw up your financial statements for the year ended 28 February 2015 before 31 August 2015.
Note that the new Companies Act also applies to Close Corporations for these purposes, so the same is true for a Close Corporation's financial statements.
Moreover, all companies need to draw up a proper set of financial statements at year-end, so you definitely need annual financial statements. If your entity operates in another legal form you're more than likely required by some other regulation to prepare annual financial statements, or you should at least prepare them for tax purposes.
Let's take a look at the key facts around financial statements
As the person who compiles the financial statements, you have to use all your source documents (e.g. invoices and receipts) to write up your general ledger and then create your trial balance. After this, capture the figures in your trial balance into your annual financial statements.
Auditors or reviewers will look at the financial statements when they do your financial audit or review.
If your organisation needs an audit or review, get this done within the six month period.
Your company needs to have either an audit or an independent review, unless it's exempt.
Note that you need to calculate your Public Interest Score (PIS) to determine if you need an audit or review The Public Interest Score (PIS) equates to the amount of responsibility that the company has to the public: The higher the score, the more responsibility.
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Here's what to doto calculate your PIS score:
The company gets 1 point for every:
• Shareholder/partner; and
• Staff member over the entire year.
You need to look at the average of all the staff members for the entire year. So, if you have a high staff turnover, don't worry about having a high PIS score!
• Every R1 million rand of turnover (or part thereof);
• Every R1 million of outside debt.
I've compiled this handy flowchart you can use to see if you need to have a review or an audit – or maybe you need nothing at all:
The graphic above explains how you can determine the moment when you should create your company's annual financial statements.
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