Definition: An abbreviated account is a simplified accounting framework that allows you to quickly and easily deal with common ranges of numbers issued by the business. Abbreviated accounts are commonly used to clarify the financial information of several organizations. Examples of abbreviated accounts are vendor accounts, supplier accounts, employee accounts, third-party independent contractor accounts, and vendor payments.
To start a business, for example, there is a balance sheet. When there are several enterprises by the same parent corporation, it’s often necessary to present the finances of each separately. A carrier bank like Capital One has an abbreviated account because one business may include dozens or hundreds of different products.
Abbreviated accounts are commonly used by companies that own one or more tangible assets. The assets can be in kind (for example, office furniture), software, property, equipment, or inventory. The less liquid the assets, the cheaper they tend to be to liquidate.
Abbreviated accounts can be a useful way to understand a company if you are being given office space, resources, or clients. Banks, for example, will often issue accounts with no cash (abbreviated bank statement). However, in everyday finance accounts, there will be cash equivalents like stocks, bonds, money markets, and so on.
Abbreviated accounts provide founders with a quick look and understanding of a company’s financial health without necessarily having to dig through hundreds or thousands of pages of financial statements.
Why Use Abbreviated Accounts?
Abbreviated accounts are common among small businesses simply because it can be easier to handle an account without every visualizing every expense. But they are used widely by large corporations to simplify their financial statements because it provides a deeper look into the data.
Accountants use abbreviated data to process small transactions online. With abbreviated data, it is possible to analyze online purchases and avoid the hassle of receiving information that would be unnecessary or difficult to process.
There are many reasons why you might want to choose abbreviated accounts. For one, having a few general accounts in one single account can make it easier to manage all of your bank accounts and grant access to many accounts at one time. It also allows you to have access to your maintains. By choosing abbreviated accounts in one overall financial account instead of multiple specific accounts, you add the simplest feature set and simplicity to the overall system.
What are full accounts?
The basic definition of a full company account is an account that comprises a profit and loss, a balance sheet, and detailed notes written by the company’s account manager.
Full accounts hold the information vital to supporting the financial operations of your business. They provide an accurate picture of your company’s operation and any sticky situations that may arise. The balance sheet reflects revenues, expenses, and cash flow generated by your business during a specific period. The profit and loss account highlights any income or loss generated by your business earning income or losing money.
Full accounts are often created by entrepreneurs who have built up their own money after selling something online or from a bust business.
Why prepare full accounts?
Several reasons why you would want to prepare a full account:
- Firstly, the statement can be actual proof of finances rather than the balance sheet, which is only required if your business is trading.
- Secondly, preparing your full statement allows you to view your profit and loss from any source, even if trades are carried out in what you consider to be an inactive period (this usually means that the statement has not yet been submitted). This enables directors to see which markets are most profitable even if they have little direct involvement in daily trading decisions.
- Full accounts also allow directors to monitor the financial health of an individual business – an important consideration if a director decides to sell or wind up the business, for example.
What’s the Difference between Full Accounts and Abbreviated Accounts?
Full accounts are for businesses that have been set up for trading by the company director/officer. Abbreviated accounts are for trading that has not been approved by Companies House and may alter day-to-day trading patterns. These accounts usually have small amounts of cash and stocks but no continuing relationships with customers.
The main distinction between full and abbreviated accounts is that the abbreviated accounts do not include the profit and loss accounts. If you have a small amount of money available to you at any time, then a full account is what you should use. A small amount is usually more useful to a consumer than a large amount they may not use regularly. Therefore, if you have a small amount available for spending on occasion, the abbreviated account may be the better choice. However, even this is not always straightforward as some companies look at the balance sheet and go from there.
What are Abridged accounts?
An abridged account may be referred to as a smaller or simplified version of a full company account. The basic concept of an abridged account is that it contains the basic information that would normally be included in a full annual account. Still, it removes any items which are specifically exempted from being reported on the full account and consists of the balance sheet to prepare tax returns.
An abridged profit and loss account will show only relevant information relating to your business so it can be used as a primary financial figure in your accounting system, alongside cash and deposits (which will show cash arising from operations as well as other income-producing assets). It will also be convenient for you to match this information against other financial information (such as tax returns) which can be used to help reduce tax bills or increase tax credits. Even accounting systems that provide detailed daily accounts for all companies will only include the information needed for basic financial reporting and comparison with other companies, so an abridged profit and loss account will be more useful to have available when you need it.
What are Filleted accounts?
Filleted accounts are accounts in which the directors have decided to omit certain information that would otherwise be included in the main version of the statement. Filleted accounts can appear on any periodic statement issued by a financial institution and are treated just like any other personal information reportable on that statement. Filleted accounts help small companies minimize the information needed for tax reporting and maintain privacy for the client.
Filleted accounts may be treated as a normal offset to the balance sheet in some reports. This allows companies to state that the objective of the accounting treatment is to meet reporting requirements with certain information (e.g., data in the filed accounts is inaccurate or cannot always be accessed), even if it has no effect on actual cash used or generated in carrying out the business operations.
Filleted accounts are records of business operations that are not used for general business purposes in the company. Filleted accounts may include expenses for legal research, audit services, payroll administration, audit performance reports, and balance sheet presentations reviewed by those higher up the food chain of a business.