What are statutory Accounts?
Also known as annual accounts are a set of financial reports prepared at the end of each financial year. In the UK, all private limited companies are requested to prepare statutory accounts every year. These annual accounts provide an overview of overall spending rather than a detailed breakdown of specific expenses and costs. For all limited companies, annual accounts must include a balance sheet and a profit and loss statement and notes about the accounts.
*** A balance sheet – a financial statement which shows how much the company owns, owes or is owed at the end of the financial year. This must be signed by a director and include a director’s name.
*** A profit and loss statement – also known as a profit and loss account or a P&L account, this shows the business’s net profit or loss.
Copies of statutory accounts should always be sent to Shareholders, Companies House, HMRC and anyone who attends the company’s general meetings.
What are management accounts?
Management account statements are not mandatory and are very rarely seen by external bodies. These are internal reports produced to inform and guide senior members of staff in crucial decision-making processes. The clue here us in the name: management accounts. Management accounts are produced by a business to help with the day to day running of the business. Management accounts are produced usually on a monthly or quarterly basis. Management accounts for small businesses typically include a profit and loss account, balance sheet, cash flow statement and a short report. In principal they are similar to the year-end accounts but are less formal and personalised to the readers requirements
So to summarise here are the main differences between the two types of financial reports:
- A statutory accounts statement is a compulsory report that will be requested by HMRC, while some business may never need to produce a management account report.
- A statutory accounts report gives an overview of financial activity, while management account reports are more tailored and specific.
- Statutory accounts are used externally while management account documents are exclusively for internal.
- Statutory accounts reports follows a general format while management account reports can take a more bespoke form.
- Statutory reports are produced annually, while management account reports can be generated as and when required by the business.
