Difference Between Statutory Accounts and Management Accounts

In business management and accounting, statutory accounts and management accounts are considered important yardsticks. These yardsticks help monitor financial movements inside an enterprise, allow for reporting of recent progress, past successes and failures, and offer forecasts for the future.

It is understandable for those lacking financial management experience to confuse statutory and management accounts. Both will sound confusing and daunting, but they are quite easy to understand once they are simplified.

We at Corient are trying to keep it simple by understanding complex accounting standards and processes and elaborating in a way that makes it easy to understand for everyone. Today, we are trying to do with statutory accounts and management accounts.

This blog will discuss statutory and management accounts in detail, their features, and what distinguishes them.

What are Statutory Accounts?

Statutory accounts are prepared annually by limited companies and accounting firms on behalf of limited companies to showcase the company’s financial status in that year. While statutory accounts do not go into minute details such as unique expenses, they give an overall view of the company’s spending via financial statements.

The financial statements in statutory accounts include a balance sheet and a profit and loss statement. Under profit and loss, you will get a clear picture of the company’s profits. On the other hand, the balance sheet will give a total valuation of the assets, liabilities, and capital gains.

Statutory accounts are mandatory, and their reports can be used internally and externally. However, the main purpose of statutory accounts is to share annual financial information with HMRC and Companies House. Stakeholders can access this information through the HMRC or Companies House website, thus helping maintain transparency.

Important Features of Statutory Accounts

Here are some important features to be remembered about statutory accounts:

• Statutory accounts are prepared in the simplest format possible. This will help communicate vital information clearly to the stakeholders and HMRC.
• Limited companies are required to conduct statutory accounts. The HMRC and stakeholders will demand that the statutory accounts reports be included in the contracts.
• It is important to note that statutory accounts are prepared for a specific time and only once a year.
• It offers an overview of a company’s finances and helps stakeholders and owners to understand the day-to-day expenses and profits made by the end of the year after deductions such as taxes, payroll, and so on.

What Are the Management Accounts?

If statutory accounts are compulsory and made specifically for stakeholders and HMRC, then management accounts are used internally to make informed decisions based on the financial position. The data under the management accounts is used internally by the management to monitor specific matters such as sales or rises in certain expenses.

Reports generated under management accounts are only for internal management and rarely shown to stakeholders, especially when the company severely suffers in certain financial areas. Companies can get quarterly, monthly, or weekly reports through management accounts, thus enabling them to maintain strict control over unnecessary expenses. To know more, please visit the management accounts service page.

Key Features of Management Accounts

• There are no set formats for managing accounts; the company decides how detailed the reports should be and how they should look.
• Since they are only for internal use, the reports of management accounts are not bound by deadlines. Only those deadlines decided by internal management are applicable.
• It is optional for businesses to create management account reports.
• Even though it is not mandatory, companies prefer to do management accounts by outsourcing them to service providers such as Corient Business Solutions. Management accounts give an overview of the current status that helps in future planning. The management accounts report will show successes and failures; course corrections can be made based on that.

Differences Between Statutory Accounts and Management Accounts

As of now, you must be clear about statutory accounts and management accounts and what they do. So, let us compare the two types and understand their differences. By knowing the difference between them, business owners and accounting firms can use them much better and gain success.

• If statutory accounts must be prepared in a simple set layout, then management accounts allow the flexibility to design and format them according to one’s needs.
• Management accounts are not mandatory, but they are very useful. You can opt for weekly, monthly, or quarterly reports per your requirements. However, statutory accounts are mandatory and must be produced annually.
• While statutory and management accounts give an overview of the financial status, management accounts delve into much deeper analysis. On the other hand, statutory accounts offer a technical viewpoint and allow stakeholders to see the decisions’ end results.
• Management accounts can give a better view of the current financial situation, helping businesses plan for the future accordingly. The management account reports can be prepared for a specific time frame.
• Management account reports are only for internal use, so the information inside is quite raw, but it will give a clear picture of the current state of affairs. Statutory accounts reports are presented well because they are for stakeholders and HMRC, and who would not like to put a good impression on them? That does not mean that statutory accounts reports are inaccurate.

Conclusion

We hope you understand what statutory and management accounts do and their differences. Both are equally important and can make businesses more efficient and transparent. However, preparing them is time-consuming and complex, so companies prefer accounting firms to do the job. But let’s admit it: even accounting firms may find it too much to handle. Therefore, you can outsource this vital work to service providers such as Corient Business Solutions to reduce stress on your accounting teams.

Besides statutory and management accounts, our teams have vast experience in Sage, QuickBooks, Brightpay, Xero, Moneysoft, Earnie, and Star Payroll. Our year-end, VAT, payroll, and bookkeeping outsourcing services are designed to give your practice an edge in the market, thus saving you time to invest in other important tasks. We can connect at your convenience by phone or online meeting to discuss our services in detail.