Ltd co's accounts
Discussion
The balance sheet is most definitely negative. The question has to be, why did the accumulated reserves of the company go from £12,140 positive in 2020 to negative £ 51,442 in 2021. That (as has been pointed out by Countdown) indicates the company managed to make a Net Loss for 2021 of £63,582 in one year.
I would be very keen to know the reason why this happened and what are the prospects for this (now insolvent) company going forward.
I would be very keen to know the reason why this happened and what are the prospects for this (now insolvent) company going forward.
Eric Mc said:
The balance sheet is most definitely negative. The question has to be, why did the accumulated reserves of the company go from £12,140 positive in 2020 to negative £ 51,442 in 2021. That (as has been pointed out by Countdown) indicates the company managed to make a Net Loss for 2021 of £63,582 in one year.
I would be very keen to know the reason why this happened and what are the prospects for this (now insolvent) company going forward.
Is there ever a situation where a company with a negative balance sheet is not insolvent (at the time of the end of that financial year, I realise a cash injection the next day could remedy this)? I have seen a number of small companies where the balance sheet becomes increasingly negative year after year.I would be very keen to know the reason why this happened and what are the prospects for this (now insolvent) company going forward.
Eric Mc said:
I would be very keen to know the reason why this happened and what are the prospects for this (now insolvent) company going forward.
That was my point 
And yet they continue to trade (at present) with prices that are impossible! (as in selling items for less than they can be purchased for!).
_-XXXX-_ said:
That was my point
And yet they continue to trade (at present) with prices that are impossible! (as in selling items for less than they can be purchased for!).
They can continue to trade for ever and ever as long as they can keep paying their bills on time. if they don't then creditors will normally ask for the company to be wound up. However as long as they have sufficient cash then theoretically they can continue to trade ad infinitum.And yet they continue to trade (at present) with prices that are impossible! (as in selling items for less than they can be purchased for!).
Obviously in the real world if you're continually loss making and you don't inject any fresh capital then at some point you go bankrupt. I have seen balance sheets which have negative balance sheets to the tune of several million but theyve been part of Group companies and constantly being bailed out by the parent or other group members.
Countdown said:
They can continue to trade for ever and ever as long as they can keep paying their bills on time. if they don't then creditors will normally ask for the company to be wound up. However as long as they have sufficient cash then theoretically they can continue to trade ad infinitum.
Yes, companies usually go bust on "cash flow" rather than anything else. i.e. unable to pay their debts as they fall due.There's also the question of the balance sheet. A negative balance sheet can also be used to require a company to be wound up. However, the directors may be able to counter that by showing, for instance, that it's just a timing issue.
Aside from insolvency rules the directors have to watch out for "wrongful trading". Those rules potentially impose personal liability on directors if they go on trading when there's no reasonable hope of turning a profit. They can also be disqualified from being directors of any company in future.
Would I trade with this company? Not without eyes wide open and maximum protection. Don't deliver anything that hasn't been paid for in advance and don't get them to do any work where you might need to go back to them for rectification/warranty/liability afterwards.
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