Management accounts and statutory accounts monitor the financial movements of a company and allow for reporting on current progress, previous successes and failures, and forecasting. The difference between the two types of accounts may cause confusion to people, especially those that do not have a clear understanding of accounting practices.

The reasons for creating the two are different and businesses have different uses from the two types of reporting. However, once the basics of the two types of accounts are explained, many see that there is no reason to be intimidated by management accounts and statutory accounts.

Statutory accounts

The goal for preparing a statutory account is to break down and showcase the financial actions taken by the company in a given year and limited companies prepare these accounts annually. These types of accounts do not include a detailed report of every single expense the company had to bear in the particular year but is a statement on the company’s overall spending.

Statutory accounts usually include a profit and loss report as well as a balance sheet, which are two of the main financial statements prepared by a business. A company secretarial services UK can help a business prepare these financial statements as well as annual statutory accounts.

One of the key features of statutory accounts is that they are formatted generically and following such a format makes them easier to understand, especially by shareholders. In addition to this, statutory accounts are mandatory for all limited companies and are prepared during a specific time once a year.

When preparing a statutory account, an accountant in Ilford will look at the day-to-day operational costs of the business and a company can make use of outsourced financial management services for their annual statutory reporting.

Management accounts

While statutory accounts break down the financial actions taken by the company during the year, management accounts are prepared for internal decision making. The management team of a company will study management accounts and the financial position of the company when making decisions.

Management accounts look at specific details useful to the management, for instance, fluctuations in specific sales. While some companies may make use of company secretarial services to prepare management accounts on a weekly basis, most prepare them on a monthly or quarterly basis.

One of the key features of a management account is that, unlike a statutory account, a management account does not have a fixed format or template and there are no specifications on the data that must be included.

There are also no deadlines or time frames within which a management report must be completed. They are also not mandatory, unlike statutory accounts, and a business may never require one. However, any accountant will know how important management reports are, especially when making decisions about the future of the company.

Key differences

Now that you have a basic understanding of statutory and management accounts, it is important to look at the key differences between the two. Knowing the differences between the two types of reporting will help you better utilise them.

Statutory accounts provide an overview of a company’s financial actions but management accounts look at financial actions in detail. The former is an annual technical account of the company’s finances during a specified period and the latter provides an in-depth look into selected areas during any time of the year.

Thus management accounts are ideal in forecasting and aids in decision making. They are also not mandatory, unlike statutory accounts, and don’t have specified layouts or templates that an accountant must follow when preparing a management report.

These are the key differences between management accounts and statutory accounts. From the objectives of the reports to the data included in them, there are a number of differences between the two and a business benefits from them in different ways. Whether it is to prepare reports or manage bookkeeping, a company can hire an accountant in Ilford through company secretarial services UK to ensure a professional, efficient, and accurate service.