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Management Accounts vs. Statutory Accounts: What You Need to Know

difference between a management and statutory account


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Difference Between a Management and Statutory Account

Management accounts are for internal use, aiding decision-making, while statutory accounts are for external stakeholders, meeting legal requirements.

Understanding the difference between management accounts and statutory accounts is crucial for business owners and decision-makers. These two types of accounting serve distinct purposes and provide different insights into a company’s financial health.

The two critical business management and accounting benchmarks are statutory and management accounts. While the Hong Kong Companies Ordinance states that all companies in Hong Kong must prepare statutory accounts, maintenance of management accounts is usually discretionary.

Both help to monitor the finances of a company and also forecast the performance in the future. That’s why understanding Hong Kong accounting standards is critical to ensure your company complies with the law.

Here’s what you need to know about maintaining management and statutory accounts.

What Are Management Accounts In Hong Kong?

As the name suggests, accounts that aid in the internal decision-making process of a company are known as management accounts. They represent cumulative financial statements prepared during the financial year of a business. Most companies use management accounts for better financial control.

The key objective of management accounts is tracking various financial metrics and key performance indicators to gain deeper insights into how a business is faring. However, these accounts are rarely available to shareholders unless the company is struggling.

Typically, here’s what is included as part of management accounts

  • Statement on the financial position, highlighting the assets and liabilities of the company
  • Key performance indicators of the business to track performance
  • Cash flow statement
  • Profit and loss statement
  • Executive summary about profit margins, turnover and expenses

Since maintaining management accounts is discretionary, most small businesses forgo drawing up one. However, if you are a startup needing accurate data for making business projections, it is advisable to maintain management accounts. Moreover, such accounts may also help you fare better when talking with external parties such as investors.

What Are Statutory Accounts In Hong Kong?

A statutory account refers to financial statements prepared every year by limited companies. The primary objective of statutory accounts is to demonstrate the various financial actions that the company took in that financial year and provide an overview of the finances.

In other words, statutory accounts show a company’s overall earnings, profit, deductions/adjustment and spending without delving into minute details. They are also known as ‘company accounts’ or ‘annual accounts’.

The exact scope of information that the statutory accounts would include depends on the size of your company. As per the Hong Kong accounting standards, the statutory accounts of a company should include the following financial reports:

  • Balance sheet
  • Profit and loss account
  • Notes on accounts
  • Audited financial statements of the financial year (1 April to 31 March)
  • Auditor’s report and opinion
  • Director’s report

A certified public accountant in Hong Kong should certify the financial statements. The audited statements also need to be approved by the company’s board of directors and adopted by the shareholders.

Only when a company attains a dormant status is it exempted from preparing audited financial statements.

management accounts vs statutory accounts

How Do Management Accounts Differ from Statutory Accounts?

Now that you know what management account and statutory account mean, understand the differences to decide how best you can utilize them for your company’s financial health.

Here are the major differences between management accounts and statutory accounts:

Legal Status

Maintaining management accounts is not mandatory as it is not stipulated by law. Such accounts serve as internal reports to guide the decision-making process of business owners.

But every company is obligated to maintain a statutory account as per law. Though small companies may be exempted from maintaining statutory accounts in some countries, there is no just exception in Hong Kong.


One can get an overview of the company’s financial activity by looking at its statutory accounts. In contrast, management account reports offer more in-depth details as they are prepared to help with the day-to-day operations of a company.


The timeline for preparing the accounts is different.

Management accounts can be generated at the convenience of the company. So the company gets to decide the frequency. But statutory accounts must be drawn up annually to comply with the law.

Filing Requirements

Under Hong Kong law, a copy of the statutory accounts should be retained with the company secretary and submitted to the Inland Revenue Department when filing a Profit Tax return.

Management accounts don’t need to be filed with any authorities as they are for internal use.


The format of statutory accounts remains the same across companies, including a balance sheet, profit and loss account, and notes on accounts.

The format of management accounts is completely bespoke as they are personalized to suit the needs of their audience.


Management accounts are meant for company executives and key decision-makers within the company.

Statutory accounts are for an external audience, which includes shareholders and company regulators.


Both statutory and management accounts are useful if you want to take stock of the current financial situation of your company.

However, when it comes to forecasts about the business, management accounts fare better because of their in-depth analysis.

Benefits of Management Accounts In Hong Kong

Here are the major benefits of using management accounts

  • These accounts can be used to obtain the latest information about the cash flows of a business as they present raw data. Business owners can review the management accounts to understand the revenue inflow and financial position of the company to develop relevant strategies to avoid any potential crisis. It can also help business owners detect financial fraud.
  • Management accounts are useful for identifying the tax liabilities of a business. Typically, chartered accountants in Hong Kong review a management account to determine the profit tax a company needs to pay.
  • Dividend payments can be calculated using management accounts.
  • Auditors need to peruse several documents to prepare the financial statements during audits. A company can prepare management accounts to help the auditors.
  • They can also identify accounting errors and correct them ahead of the audit.
  • Management accounts can help companies identify unwanted expenses and plan expenditures of resources to maximise profits.
  • The company executives can decide the format since there is no statutory requirement.

Benefits of Statutory Accounts In Hong Kong

  • Statutory accounts help to keep track of the financial health of your company.
  • They are a ready reckoner of your company’s performance and investments that various stakeholders, investors, and even regulators can refer to. This is especially useful if the company wants to privately or publicly raise money.
  • Statutory accounts represent a true and fair view of the company’s financial position and provide insights into the actual business performance. This adds credibility to your business.
  • Statutory accounts can be used to discover the risk of financial fraud.
  • It offers insights into the efficiency and effectiveness of the processes adopted by the company.

Bottom Line

Now that you have a succinct understanding of how SMEs work with management accounts and statutory accounts do not delay in seeking help to get the accounts of your Hong Kong company audited.

Air Corporate offers accounting services for SMEs and cuts the necessary paperwork involved. Whether you are a newly established business in your early days or one that has been around for a while, different packages are available to suit your needs.

So save your precious time by outsourcing the work to our qualified accountants.


As per the Companies Ordinance, a registered non-Hong Kong company should file a certified copy of statutory accounts with the Companies Registry along with its annual return if it is;

  • required by the laws of the place where the company is originally incorporated or registered; or
  • if the company is bound by the rules of any stock exchange or other regulators in that jurisdiction to deliver such accounts for inspection by the public

An auditor can give either a qualified opinion or an unqualified opinion.

An unqualified opinion means that the chartered accountant agrees with the methods used for preparing the accounts and provides reasonable assurance about the accuracy of accounts.

On the other hand, a qualified opinion means there may be certain limitations about the information provided, or the financial statements have not been prepared following the generally accepted accounting principles.

Hong Kong laws do not impose any penalty for late filing of audited accounts.

However, audited financial statements are part of tax returns, and the tax authorities levy a fine for delayed submission.


Vivian Au

For many years, I worked at big accounting and company secretary firms in Hong Kong. I started Air Corporate to make the life of entrepreneurs and SMEs easy.

Vivian Au


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