Statutory reports are a legal requirement. Statutory accounts are a crucial part of running your business. The purpose is to show your shareholders how your company is performing, but what is statutory reporting and accounting?
What Is a Statutory Account?
The statutory account is a financial report that public companies and private limited companies need to prepare at the end of every financial year. Statutory reporting is very useful as it provides an overview of any company’s financial health, highlights how it has been successful and efficient, but can also uncover potential warning signs. Filing a statutory account is a legal requirement, and can be a daunting prospect.
What Goes Into a Statutory Account?
For a limited company based in the UK, statutory accounts should include three things:
A balance sheet, which shows the value of everything your company owns and what it was on the last day of the financial year.
Profit and loss account, which includes your running costs, sales, and any loss or profits made in the last financial year.
Any notes about the accounts, for example, if any money is owed, and what type of payments they are.
The Key Features of Statutory Accounts
The reports are provided in a generic format, as this makes them easy to understand for the HMRC and shareholders.
They are prepared for specific times and are only completed once per year. The reports are mandatory for all limited companies and will be requested by the HMRC. If your business has shareholders, a statutory account can also be included as part of the contract.
Overall, it is perfect for helping the business owner understand operational costs, and see the profit after all adjustments were made at the end of the year.
A statutory account does not need to be a comprehensive breakdown, including expenses or invoices. It is produced as a statement of the overall spending of the company.
Is a Statutory Account and a Management Account the Same Thing?
It is important to note the differences between a statutory account and a management account. In accountancy, a management account does not need to be completed within an official time frame. And they are not mandatory. However, management accounts can help business owners prepare for the future, and provide a detailed breakdown of the business expenses. These are usually used for internal decision-making. They are very rarely given to shareholders unless they are requested or the company is struggling. Management accounting reports are generated as often as they want.
How to Make the Most of Statutory Reporting
Reports can be overwhelming to put together, but as they need to be submitted at the end of the company’s financial year to Companies House, HMRC, and shareholders as part of your tax return, the statutory accounts need to be prepared as soon as possible. In addition, it’s important to make sure you are claiming all legal expenses as every penny you claim as a business expense is taken off your overall profit, meaning you have to pay less corporation tax.
Statutory accounts provide a wonderful insight into your financial records, which is why they need to be organised and prepared properly.