Management accounts provide vital information on a business’s current financial position. By understanding this, businesses can use the information on profits and losses included in the accounts to help them plan more effectively.
Are They The Same as Financial Statements?
There are a number of key differences between financial statements and management accounts. Financial statements must be comprehensive and meet regulatory standards before being published, while management accounts are there to inform planning.
Financial statements tend to be concise, with transactions grouped together instead of being fully listed. Management accounts provide more detail to help with the decision-making, and they do not need to follow a set format but can be presented in a way to match the preferences of the business owner, stakeholders or accountants. If you need help with how to arrange and use your management accounts, an accountant can be helpful. To find one with relevant experience in your area, use an internet search such as business accountants Gloucester for results like www.hazlewoods.co.uk/expertise/business-accountants/gloucester.
Another difference between them is that financial statements will cover a specific time period, such as a tax year, a calendar year or a quarter. Management accounts might use information from different time periods, such as year-on-year or month-on-month, to make comparisons and find trends to inform decision-making.
Management accounts can also use forecasts derived from previous information. These can be used to inform a particular strategy. Unlike financial statements, which have a focus on assets and how much the business is worth as a whole, management accounts aim to give a fuller picture of how the business is performing financially under particular circumstances.
Different Accountants
If you use accountants for both these types of financial management, you may need different ones for each. Financial statements are generally produced by a certified public accountant, while management accounts are prepared by certified management accountants. If you are not sure which one you need, speak to some accounting firms, and they will be able to tell you what expertise you need and how they can help.
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