A large part of the work of a small business accountant involves preparing accounts.
A set of accounts generally comprise a profit and loss account and a balance sheet.
The profit and loss account tells the small business how much money it has made over a given period by considering sales and costs.
The balance sheet shows how much wealth the business has accumulated by considering assets and liabilities.
The profit and loss account always runs over a certain period of time, it could be yearly, quarterly, monthly or six monthly.
The balance sheet is always a snapshot on the one particular day that the accounting period of the small business ends on.
So, for example, a small business could have a set of accounts with a profit and loss account for the year ended 31 December 2012 with the balance sheet being shown as at the year end date of 31 December 2012
Most small businesses generally have year end accounts prepared as these provide a vital annual picture of the financial health and success of the business. In addition, information from the year end accounts are usually required to be included on self assessment tax returns that are required by HMRC or in submissions to companies house if the small business is a limited company.
Ultimately, the decision as to how often the accounts are prepared always rests with the owner of the small business, generally after discussion with the accountant to evaluate all the potential costs and benefits that are involved.
A lot of small businesses and particularly new business start ups prefer to have quarterly or even monthly accounts prepared. In this way, they have more up to date financial information at their disposal so that they can measure their progress and learn from any mistakes sooner than if they were to wait for the year end accounts to be prepared.
This is an area where the accountant can generally be of most benefit to the small or new business start up since they can advise at the earliest opportunity on the most effective way to produce whatever accounting information is required.