Knowing which type of financial accounting and management accounting you need to manage your business successfully is essential. The whole purpose of these accounts is to monitor financial movement and also to allow for reporting on current progress, and predictions for the future.
The difference between the two practices is quite simple to appreciate when you know the basics. Look at statutory accounts vs management accounts here…
Statutory Accounts Fundamentals
A statutory account covers the reporting of annual breakdowns of financial actions taken by limited companies. This report doesn’t include one-off expenses or invoices but is a statement of the company’s overall spending.
The accounts must follow a specific layout consisting of a profit and loss report alongside a balance sheet. This has references to turnover, profits, the total value of assets, any capital gains, and business credit.
The main reason for producing statutory accounts is to impart annual financial information with HMRC and shareholders. They’re completed just once a year and are compulsory for all limited companies. This overview of business finance plays an important role in the appreciation of daily operational costs including payroll, payment of tax, and deductions.
- Formatted generically to make them easy to understand
- Mandatory for all limited companies
- Preparing statutory accounts is done at a specific time and completed once a year
- Operational costs, profits, and adjustments are all made known
Management Accounts Details
Management accounts are almost entirely used for internal decision making without involving shareholders. These reports can be made on a weekly, monthly, or quarterly basis – and can include current needs to combat falls in sales or rises in expenses.
These accounts can be designed and formatted to suit your individual business requirements, and aren’t mandatory. They allow for a greater depth of analysis and focus on business needs, and are an excellent way of providing forecasts and planning for the future.
Management accounts can be tailored to within specific timeframes and the type of income and expenses to determine future spending. All this data can be used to provide a true picture of the current financial state of the business consistently throughout the year.
- No set format or data requirements
- Time frames and deadlines can be set by the business
- No mandatory requirement to produce these accounts
- An invaluable resource for making strategy and direction choices
Get Your Annual Submission Handled Professionally
Preparation and filing of your statutory accounts will be done with skill and expertise by registered and trusted accountants. You’ll get all the help and advice you need with closing your company’s financial year in the correct manner.
Your Xero statutory accounts service includes preparation based on financial records for the respective accounting year, submission of annual accounts and tax returns to Companies House and HMRC on time, and advice on relevant changes and recent updates to legislation, so your accounts will always be accurate and up-to-date.
Should any financial imbalances occur as your account is monitored via the Xero set-up you’ll be notified in a timely manner – any potential issues will be identified and resolved.