Types of Accounts
TYPES OF ACCOUNTS
Just as there are several different types of accountants, there are also many different types of accounts. However, they can be grouped under two main headings:
- Statutory accounts - also known as financial accounts
- Management accounts.
These are compulsory for companies and must be sent every year to the shareholders in your company and to Companies House. In addition:
- They must follow a standard set of rules and conventions, and show what went on during the financial year.
- They are mainly used by people outside your business - e.g., bankers, customers, suppliers and, of course, the taxman.
These type of accounts are essential for well-run companies but are not strictly required by law. As their name suggests, management accounts are mainly used by management. In fact, it is very rare for them to be shown to anybody outside the company and companies cannot usually be forced to show their management accounts to anyone other than the auditors.
There are no rules that say what management accounts must look like. It is up to each company to decide what format will best help it to understand what's going on, control the business and make better decisions.
Management accounts often predict the future as well as keep track of the past, for example, they usually include forecasts of what is going to happen tomorrow, as well as recording what happened yesterday. In contrast, statutory accounts only ever record what has already happened in the past.