Annual accounts in companies

Among all the taxes and procedures that companies must complete are annual accounts, one of the central obligations of many entities.

What are annual accounts?

Annual accounts are a set of accounting documents that reflect the financial and equity situation, as well as the results, of companies at the end of each fiscal year.

These documents are mandatory for some entities, such as public limited companies and limited companies, and must be filed with the Commercial Registry.

Who is required to submit the annual accounts

All companies that carry out an economic activity are required to prepare and submit annual accounts, regardless of their size or legal form.

They will not have to appear in the following cases:

Individual entrepreneurs are not required to submit annual accounts.
workers who are governed by the Normal Direct Assessment System must keep accounting records, but are not required to file them with the Commercial Registry.
companies and other self-employed individuals are also not required to keep annual accounts.

Types of annual accounts

There are different types of annual accounts depending on the characteristics of the entities.

Normal annual accounts

This type of accounts is submitted by all companies, except those that may submit abbreviated annual accounts or those that may adhere to the General Accounting Plan (PGC) for SMEs (small and medium-sized enterprises).

Abbreviated annual accounts

Normal and abbreviated annual accounts are different, with abbreviated annual accounts having a simpler format and less detailed information.

Entities that may submit an abbreviated balance sheet, annual report and statement of changes in equity are those that, for two consecutive financial years, have at least two of the following circumstances at the closing date of each of them:

That the total assets do not exceed four million euros.
That the net amount of its annual turnover does not exceed eight million euros.
That the average number of workers employed during the financial year does not exceed fifty.

Regarding the profit and loss account, companies may present it in its abbreviated format when, for two consecutive fiscal years, at least two of the following circumstances are met as of the closing date of each of them:

That the total of the asset items does not exceed eleven million four hundred thousand euros.
That the net amount of its annual turnover does not exceed twenty-two million eight hundred thousand euros.
That the average number of workers employed during the financial year does not exceed two hundred and fifty.

Companies that can present the abbreviated balance sheet, notes and statement of changes in equity will not have to present the cash flow statement.

SME annual accounts

Entities that consider themselves SMEs can choose between applying the full version of the PGC or the version specifically for SMEs. Furthermore, companies that apply the full version of the PGC may prepare abbreviated annual accounts if they meet the requirements for its application.

Therefore, an SME that meets the requirements for submitting abbreviated annual accounts may choose between using the abbreviated forms provided for in the full version of the PGC or using the forms provided for in the PGC in its version for SMEs.

Mandatory documents for annual accounts

The annual accounts consist of the following documents:

Balance sheet. Shows the company’s financial situation at a given point in time.
Profit and loss account. It shows the company’s financial results for a financial year.
Annual report. It provides additional information on the company’s financial, asset, and earnings situation, as well as clarification and mention of specific aspects of the company.
Statement of changes in equity. Shows the changes in a company’s equity during a fiscal year.
Cash flow statement. Shows the source and destination of the company’s funds during a fiscal year.

When a balance sheet can be prepared in an abbreviated format, the statement of changes in equity and the statement of cash flows will not be mandatory.

Presentation of the annual accounts

To present the annual accounts, the following must be taken into account:

Formulation. There is a three-month period from the end of the financial year to prepare the accounts, normally from January 1 to March 31.
Approval. They must be approved by the company’s governing body within six months of the end of the fiscal year, with the deadline being June 30th if the fiscal year coincides with the calendar year.
Presentation. The annual accounts must be submitted to the Commercial Registry for filing within one month of their approval.

Annual accounts are a set of financial documents that many companies must submit. There are different types of annual accounts, and they are composed of different documents. It’s important to keep in mind the deadlines for preparation, approval, and submission to ensure they are submitted correctly.

Further information

This article is part of our service Business consulting. Visit this section where you will find all the useful information on this topic, including a complete guide on How to start a business in Spain as a foreigner.

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