What are Statutory Accounts and How Do They Work?

Statutory accounts are required by law and must be filed with Companies House and HMRC. Statutory accounts are extremely important for a firm's internal operations since they allow shareholders to see how the company is doing.

While bigger organisations are required to produce detailed statutory accounts, smaller and medium-sized enterprises can choose what to file, making it more difficult to determine what to submit.

In this article, we'll explain what statutory accounts are and what they must include, as well as provide information on abridged accounts for small firms.

What are statutory accounts, and how do they work?

Limited companies are required to prepare statutory accounts every year. Their goal is to identify and highlight the company's financial actions over the course of the year.

Depending on the size of the company, the documentation included in statutory accounts may differ. Smaller businesses, for example, can file a smaller, simpler balance sheet and choose whether or not to include profit and loss reports, balance sheets that reference the value of assets, capital gains and business credits, and cash flow statements, whereas larger enterprises must file profit and loss reports, balance sheets that reference the value of assets, capital gains and business credits, and cash flow statements.

Internally and externally, statutory accounts are employed, but the primary reason for producing them is for HMRC purposes. Internally, statutory accounts will serve as a record of the company's annual financial data for its shareholders.

What's the difference between statutory and management accounts?

Both management and statutory accounts have the same goal: to track financial activities, report on monetary achievements and failures, and provide detailed financial projections. However, there are substantial distinctions between the two, and they should not be conflated.

Statutory accounts are only published once a year and are primarily used to educate HMRC and company shareholders on the financial activity of the company throughout the year.

Management reports, on the other hand, are generated purely for internal decision-making, which means they are not provided to HMRC and are rarely released to shareholders unless requested.

Do you require an accountant to handle your statutory accounts?

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