What are Management Accounts?

What are Management Accounts?

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Hi guys

This may seem like a daft question but can you give me examples of 'Management Accounts'?

I keep seeing the phrase 'prepare monthly management accounts' in job specs and just want to firm up on it's true meaning. To me it's cashflow forecast, fixed asset register additions, sales figures, aged debtors, cash at bank etc, p&l forecast v actual etc etc.

I work in financial accounting and don't really think of the tasks I do as being management/financial accounts, just as my job. Just looking for some clarification.

Cheers all.

T

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By MDK45
29th Nov 2013 08:17

Management accounts can take any form the management want them to. Generally, in my experience, a manacs pack would consist of a profit and loss account (actual v forecast and/or budget), commentary on performance, variance analysis, cashflow, balance sheet, debtor analysis. I have never come across management being particularly bothered about fixed assets yet.

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By johngroganjga
29th Nov 2013 09:17

Management accounts are accounts prepared for purposes internal to the organisation in question, as distinct from accounts that are prepared for external reporting. As the previous post says they can include whatever management want them to include - but the basic minima are probably P&L and Balance Sheet, both including comparisons with previous periods and budgets.

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By Ken Howard
29th Nov 2013 10:49

More detail

All the management accounts I've produced have been a lot more detailed than the basic P&L and BS and in fact those statements aren't really too much help for management.  In fact I've always thought that doing the normal EOY statements on a monthly basis is quite pointless, especially if you end up spending loads of time doing calculations & journals for reversals, depreciation etc.

I tend to break down the sales, cogs and gross profit into whatever useful segmentation, which may be as simple as splitting between labour and part sales, or departmental splits, or location splits, or wet & dry sales in a pub, or sit in versus takeaway sales in a cafe.  I'd also add in non financial information such as number of hours worked versus number of hours billed, or number of customer orders, or number of items per order, etc.

Instead of a simple balance sheet, I'd prepare a forecast showing the current position and then looking forward to show the cash flow forecast etc to show how things will pan out over the forthcoming months rather than how it looked at the last month end, to plan for working capital needs and highlight any issues re debtors/creditors payments, etc.  I'd also be very cautious about over use of the standard ratios - many people don't understand them and they can easily be skewed by large one-off transactions making them dangerous for those who do understand.

Management accounting is a completely different area of accounting and I've never thought it particularly useful to call monthly financial accounts as "management accounts".  I do cringe when I see "management accounts" prepared which are literally nothing more than the same P&L and BS that would be produced at the year end, or worse still, consist of nothing more than lazily produced reports straight out of Sage.

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