If you have been associated with any business in the past, then you may have heard about statutory and management accounts. But if you are starting out a new business, then you must know the difference between the two since the majority of financial handling of any commercial entity in the UK is managed through these accounts.
Before diving deep into the difference between the two, it is worth mentioning that salutatory accounts are more important to be taken care of. There are specialized accountant services that can help you in this regard. Here, you can know more about these accountants and the statutory accounts.
However, in this blog post, we will keep our focus on the difference between statutory and management accounts— the two important elements of financial management of any corporation.
1) Having a Statutory Account Is Mandatory
As mentioned earlier, statutory accounts are essential to maintain. And not just to streamline your internal finances but also for the other players associated with your business. For instance, limited businesses have to create statutory accounts and have to share them with HM Revenue and Customs. Moreover, shareholders also ask for statutory account information in many instances to invest in a venture.
On the other hand, the management account is not a mandatory financial requirement for a company. Producing a management account usually has internal implications. They help the higher management in setting up a future business pipeline. Also unlike statutory accounts, there is no limit associated with management accounts. Any business can have as many management account session during its fiscal year as they want in the span of 12 months.
2) Greater Details Are Part of Management Accounts
Statutory accounts usually follow a generic format and the data needed for them are readily available since it is related to the most essential elements of the business (balance sheet, profit/loss, etc). In contrast, management accounts entail greater details. Accountants actually have to mine the data in order to establish management accounts used for financial forecasts and budgeting purposes.
3) Management Accounts Are Needed in More Frequency
If your business planning depends on the results inferred from the management accounts, then you would surely require them in greater frequency. For instance, if your business is classified as a corporation that deals on many fronts, then you might have to produce management accounts every month. Generally, it is recommended to produce a management account every quarter.
On the other hand, statutory accounts are compiled once a year. They actually summarize all that has happened with the finances of your business in the last year, without grinding on little details.
4) Management Account Is For Future While Statutory Accounts Is for Present
Management accounts help in planning the future while statutory accounts let us look in the financial past to make adjustments in the ongoing period.
To put it in a nutshell, both accounts are necessary for the good management of any business. However, statutory accounts are more significant and elementary for every business regardless of its size and scope.