Comparison of management accounting and financial accounting :
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The differences between management accounting and financial accounting include:
Financial accounting is used primarily by those outside of a company or organization. Financial reports are usually created for a set period of time, such as a fiscal year or period. Financial reports are historically factual and have predictive value to those who wish to make financial decisions or investments in a company. Management Accounting is the branch of Accounting that deals primarily with confidential financial reports for the exclusive use of top management within an organization. These reports are prepared utilizing scientific and statistical methods to arrive at certain monetary values which are then used for decision making. Such reports may include:
- Management accounting provides information to people within an organization while financial accounting is mainly for those outside it, such as shareholders
- Financial accounting is required by law while management accounting is not. Specific standards and formats may be required for statutory accounts such as International Financial Reporting Standards.
- Financial accounting covers the entire organization while management accounting may be concerned with particular products or cost centres.
Financial accounting is used primarily by those outside of a company or organization. Financial reports are usually created for a set period of time, such as a fiscal year or period. Financial reports are historically factual and have predictive value to those who wish to make financial decisions or investments in a company. Management Accounting is the branch of Accounting that deals primarily with confidential financial reports for the exclusive use of top management within an organization. These reports are prepared utilizing scientific and statistical methods to arrive at certain monetary values which are then used for decision making. Such reports may include:
- Sales Forecasting reports
- Budget analysis and comparative analysis
- Feasibility studies
- Merger and consolidation reports
Financial Accounting, on the other hand, concentrates on the production of financial reports, including the basic reporting requirements of profitability, liquidity, solvency and stability. Reports of this nature can be accessed by internal and external users such as the shareholders, the banks and the creditors.
Contents
Regulation and standardizationWhile financial accountants follow Generally Accepted Accounting Principles set by professional bodies in each country or International Financial Reporting Standards, managerial accountants make use of procedures and processes that are not regulated by a standard-setting bodies.
Multinational companies prefer to employ managerial accountants who have a widely recognised certification such as CGMA, Chartered Global Management Accountant certified by the AICPA and CIMA,ACMA certified by the Institute of Cost Accountants of India [1], Chartered Management Accountant certified by the Chartered Institute of Management Accountants, or CMA, Certified Management Accountant certified by the Institute of Management Accountants.
Time Period Managerial Accounting provides top management with reports that are future-oriented, while Financial Accounting provides reports based on historical information. There is no time span for producing managerial accounting statements but financial accounting statements are generally required to be produced for the period of 12 previous months.
Contents
Regulation and standardizationWhile financial accountants follow Generally Accepted Accounting Principles set by professional bodies in each country or International Financial Reporting Standards, managerial accountants make use of procedures and processes that are not regulated by a standard-setting bodies.
Multinational companies prefer to employ managerial accountants who have a widely recognised certification such as CGMA, Chartered Global Management Accountant certified by the AICPA and CIMA,ACMA certified by the Institute of Cost Accountants of India [1], Chartered Management Accountant certified by the Chartered Institute of Management Accountants, or CMA, Certified Management Accountant certified by the Institute of Management Accountants.
Time Period Managerial Accounting provides top management with reports that are future-oriented, while Financial Accounting provides reports based on historical information. There is no time span for producing managerial accounting statements but financial accounting statements are generally required to be produced for the period of 12 previous months.
Other differences
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Difference of Financial Accounting Vs. Management Accounting Chart :
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Financial Accounting
Financial accounts are supposed to be in accordance with a specific format by IAS so that financial accounts of different organizations can be easily compared.
Financial accounting helps in making investment decision, in credit rating. A financial accounting system produces information that is used by parties external to the organization, such as shareholders,bank and creditors. Financial accounting focuses on history. Financial accounting reports are primarily used by external users, such as shareholders, bank and creditors. preparing financial accounting is the work of finance department. Preparing financial accounting reports are mandatory especially forlimited companies. Financial accounting statementsare required to be produced for the period of 12 months. Most financial accounting information is of a monetary nature. The main objectives of financial accountng are :i)to disclose the end results of the business, and ii)to depect the financial condition of the business on a particular date. Follows a full process of recording, classifying, and summarising for the purpose of analysis and interpretation of the financial information. the financial accounitng , the origin of preservation of knowledge gives emphasis on recording keeeping on a whole firm basis for the purpose of decisions by all the users of accouning information, both external and internal. |
Management Accounting
No specific format is designed for management accounting systems.
Management Accounting helps management to record, plan and control activities to aid decision-making process. A management accounting system produces information that is used within an organization, by managers and employees. Management accounting focuses on future. Management accounting reports are exclusively used by internal users viz. managers and employees. managerial accounting is not specific task of particular department. co-ordiantion of all department creates management accounting. There are no legal requirements to prepare reports on management accounting. No specific time span is fixed for producing financial statements. Management accounting information may be monetary or alternatively non monetary. The main objectives of Management Accounting are to help management by providing information that used by management to plan, evaluate, and control. Cost accounts are not preserved under Management Accounting but analyses necessary data from financial statements and cost ledgers. Management accounting uses cost data for provision of information for strategic management decisions. It is mainly concerned with the provision of help to the managers to asses them in the process of decision making and design business strategies. |