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Management accounts:

Management accounts consist of KPIs – Key Performance Indicators depending on a particular industry. Normally this would consist of monthly P&L – Profit & loss account, BS – Balance sheet, & a CF-Cashflow Forecast. However, it really depends on a particular Industry & Company you work in.  Some Companies will use terms like Flash reporting, management reporting packs & Dashboards. In reality they all convey the same message & that is the profitability, liquidity, & ability to continue as a going concern for the foreseeable future.

Management accounts summarise the KPIs – Key Performance Indicators of a Business & enable the management to make informed economic decisions. These KPIs will vary from Company to Company e.g. Sales, Refunds as a % of Sales, SG&A & Head-count analysis.   

Management accounts are prepared for the internal audience of the business e.g. Shareholders & Senior Management (Board of directors).

Management accounts may be prepared in multiple currencies of the business e.g. USD, GBP, & HKD.

In a Small Company, a Management-Accounts-Pack may consist of a Trial balance, Profit & Loss Account, Balance Sheet & a Cashflows Statement.

Usually Management accounts are reviewed by the likes of Financial Controllers or Finance Managers to ensure there are no material misstatements.

Statutory accounts:

Statutory accounts are prepared in line with the local GAAP – generally accepted accounting principles e.g. in the UK statutory accounts are prepared in line with FRS 101, FRS 102, FRS 105, or IFRS.

Statutory accounts are submitted to the local Registrar’s Office e.g. in the UK the Statutory accounts are submitted to Companies House. Statutory accounts are usually submitted within 9 months after the financial year end of a Company in the UK.

Statutory accounts are signed off by the Company’s Directors & audited by the Auditors. Although some Companies may be too small & do not need to get their accounts audited.

When it comes to raise finance for the business, Banks usually ask for the Statutory Accounts Copies to see if the Business has been Trading & Filing accounts.

Statutory accounts are compiled using the management accounts of the Company & two should always reconcile.

Statutory accounts are usually prepared in Ms Excel & Word; whereas Management accounts are prepared using the Company’s Accounting/ reporting Systems e.g. SAP, Oracle, & MIS.

Management accounts do not have any particular deadline except internal deadline imposed by the Company’s management whereas the Statutory accounts must be prepared & submitted to Companies House in line with their prescribed deadlines.

In summary, Accountants are involved in the preparation of management accounts as well as statutory accounts. In Europe all Listed Companies are now preparing their statutory accounts in line with IFRS – international financial reporting standards. If you’re studying ACCA/CA/ACA may be its better to opt for IFRS stream instead of local GAAP.