In February 2011, technical release TECH 01/11 was published by the Institute of Chartered Accountants in England and Wales. This gives company directors guidance on the accounting records required by section 386 of the Companies Act 2006.
The release covers a variety of areas including the content and form of accounting records. For example, it states that an 'unorganised collection of vouchers and documents' would not be adequate accounting records. If the information is held electronically, it would need to be easy to retrieve appropriate data.
The guidance also clarifies which accounts section 386 applies to and the length of time such records have to be kept (three years for private companies and six years for public companies). It offers a polite reminder that other legislation (such as tax legislation) may require records to be kept for a longer period.
The release also covers the following:
- the requirement that records are kept of all money received and expended;
- the requirement that accounting records be maintained so the financial position of the company can be revealed with reasonable accuracy at any time;
- the requirement that statements of stock are to be held at year end; and
- the penalties and disqualification orders which apply under the Companies Act 2006.
Finally, the guidance covers the requirement that accounting records should be such as to allow directors to prepare a reasonably accurate statement of the company's position at any given time. The guidance suggests that when providing this statement, it should be accompanied by a memorandum outlining any expected losses. This would include the provision for bad debts and depreciation which are issues largely dealt with at the end of the accounting year.