Statutory OR Management Account?
Statutory OR Management Accounts - What's the Difference?
The purpose of statutory accounts and management accounts is to monitor financial movement and allow for reporting on current progress, previous successes/failures and to provide forecasts for the future.
What Are Statutory Accounts?
An annual report prepared by limited companies to break down and showcase financial actions taken by the company in that year.
A statutory account does not include every last bit of detail, such as unique expenses or invoices. But it does form a statement of the company’s overall spending.
Generally, it includes a profit and loss report and a balance sheet. The profit and loss report displays turnover and profits, while the balance sheet also references the total value of assets, capital gains and business credit.
The primary reason for producing statutory accounts is to share the Limited Companies financial information with shareholders and HMRC.
Key Features of Statutory Accounts:
Statutory accounts are formatted to follow a generic layout/format to make them easy to understand for shareholders and HMRC.
They are mandatory for all Limited Companies and will be requested by HMRC.
They are prepared for a specific deadline and only completed once a year.
Statutory reports offer an overview of the businesses finances. This type of accounting is great for helping the business owner understand day-to-day operational costs, displaying profit that includes all adjustments made at the end of the year. Deductions, taxes, payroll, etc.
What Are Management Accounts?
These reports are produced to allow business owners to make decisions based on the financial position of the company. They show specific data such as dips in specific sales or rises in certain types of expenses.
Management reports are exclusively used for internal decision making. Many businesses have management account produced on a quarterly or monthly basis.
Key Features of Management Accounts:
They have no set format or data requirements. A management account report can look and include whatever you decide.
Management accounts do not need have specific deadline.
They are not mandatory.
Management accounts help plan for the future; allowing for adjustments within the business.
What Are The Differences?
Now let's compare them - Knowing the difference between both reporting practices helps business owners understand how best to utilise them for financial management and future success:
Management accounts can be designed and formatted however you like, but statutory accounts must follow specific layouts.
While using management accounts is highly recommended, they are not mandatory; however statutory accounts must be produced annually.
Statutory account reports provide an overview of all finances while management accounts get into specific details.
Both statutory accounts and management accounts can help review your current financial situation, but management accounts are much better at providing forecasts and planning for the future.
Thank You for reading - we hope you found it useful.
If you have any questions regarding the Accounts for your business please give us a call on 01366 388866 or email at info@thebusinessclinic.ltd.uk
