What are Statutory and Management Accounts and why are they important?
Statutory and Management Accounts are two different documents with very different purposes.
Statutory Accounts are a legal requirement for all private limited companies. who must prepare statutory accounts covering the company’s financial year or period, and must be completed once a year. The accounts prepared are required to be approved by the Board of Directors and made available to shareholders. Once approved, a copy of the accounts must be filed with Companies House within 9 months after the financi ends.
al period
These are prepared to present the financial position for a year just passed and are used to calculate corporation tax which is payable to HMRC. They also allow shareholders to review the performance of the company for the year. The accounts are filed at Companies House so that they can be shown publicly on their register.
Management Accounts are not mandatory or required to be prepared by law, however they do serve as an important tool in reviewing current financial performance, thus allowing management to take decisions in the short and long term.
What is reported in Statutory Accounts: (Small Companies)
The contents of your Statutory Accounts is linked to the size and type of your business, you can look this up on HMRC’s website HERE. The basic contents are as follows:
Director report
This report is prepared by the board of Directors and presented to the shareholders at the Annual General Meeting (AGM). The report provides…
- An overview of the company’s performance and activities during the year
- List of all Directors and their responsibilities
- Financial statements and report of the auditors
- A statement of the Director’s opinion on the current concern basis of the company.
Profit and loss report
The profit & loss account shows the financial performance of the company during the financial year. It includes revenue, associated cost of sales, administrative expenses, finance costs and corporation tax, resulting in the overall profit or loss incurred in the year.
Balance sheet
The balance sheet shows the position of the company at the year-end date. It includes long-term and short-term assets, long-term and short-term liabilities, and the equity make-up of the company. This must be approved by the board and signed by a director.
Notes to the accounts
These notes to the accounts are the additional information and explanations that accompany the financial statements. They provide more details and clarity about the items, amounts, and transactions reported in the balance sheet, income statement, statement of changes in equity, and cash flow statement.
What is in your Management Accounts?
Management accounts are not mandatory or required to be prepared by law, however they provide an important tool in reviewing current financial performance, allowing management to take decisions in the short and long term.
Format of management accounts
These can be taken straight from a company’s accounting system such as SAGE, QUICKBooks and Xero, or prepared in excel and formats adopted to the internal information needs of a company’s management.
Management accounts prepared usually focus on set KPIs that are considered important to a company.
Your accountant and board can help you define your KPI’s, key performance indicators which become a good yardstick for performance. With regular meetings with your accountant you can review the management accounts and make decisions throughout the year according to where the business is against target.
If you are looking for an accountant to prepare your statutory and management accounts, get in touch with the team and ask them about the services we offer or have a read of what we provide.
Find out how we help businesses with their Statutory and Management Accounts HERE
