Читать книгу Finance Basics - Stuart Warner - Страница 12

There are different types of financial information and reports produced by the finance team, which generally fall under two categories: financial accounting and management accounting.

Financial accounts

 Purpose. Financial accounts are used to report the financial results of a business. They are produced at least annually, mainly for the benefit of external users, such as shareholders.

 Focus. The historical financial results of a business.

 Scope. The financial results of the whole business.

 Frequency. Prepared at least annually, although some companies prepare ‘interim’ financial reports every six months.

 Requirement. Financial accounts are a legal requirement for regis-tered companies.

 Format. There are financial accounting standards which govern the format and contents of financial accounts.

 Accuracy. Financial accounts are required to show a ‘true and fair’ view. For practical purposes this means that they should be as accurate as possible and not misleading. ‘Accuracy’ will depend upon the size of a business.

Management accounts

 Purpose. Management accounts provide financial and non-financial information and are used to help managers make informed business decisions. They are usually confidential and not released outside the organization.

 Focus. Use past and present information to make decisions about the future.

 Scope. Can report on products, customers, departments, divisions or the whole business.

 Frequency. Produced whenever required – usually at least monthly.

 Requirement. There are no legal requirements for management accounts. Although, in practice, some external investors, such as banks, may insist on regular management accounts as a condition of funding.

 Format. There are no standard formats or rules for management accounts but some popular established techniques are used, for example, the calculation of profit margins and other financial ratios.

 Accuracy. Management accounts are required to be as accurate as possible as they are used to make critical business decisions. At the same time, as management accounts are used to predict an uncertain future, they can include reasonable approximations.

Financial accounts report historical data. Management accounts help managers make critical decisions.