In accounting world some difference we need to understand first. For example management accounting vs financial accounting is important topic for accounting students. In word these are similarly same meaning, but it slightly differ each other. Let we see what are the top difference between management accounting vs financial accounting on below paragraphs.
Financial and Management Accounting Basics
In financial and managerial accounting now we see about Management accounting basics. There is no separate set system for management accounts, but it may be any form of accounting system, it enables a business to be conducted more effectively and efficiently. Management accounting is a system that collects, classifies, summaries, analyses and reports information that will assist management in discharging its functions and in their decision making and control activities. Unlike financial accounting, where the main objective is on reporting to outsiders, whereas management accounting mainly focuses on internal planning, reviewing and control various activities. In financial and managerial accounting this one is completely based on management levels.
Financial Accounting Basics
In financial and management accounting let we see about financial accounting basics. Financial Accounting the transactions which are financial nature are to be identifying, recording, classifying, summering, analyzing and interpreting in structured manner, and report to concerned persons, with a view to preparing results of operation in the form of profit and loss account or income statement and balance sheet, indicating the financial position of the business at the end of that relevant period. Financial accounting is governed by many rules; out of that few rules are mandatory nature. The accounting work cannot override from the generally accepted accounting practices and techniques. In financial and management accounting this one completely based on financial levels. Financial and Managerial Accounting Textbook helps you to understand these two types of accounting. In internet lot of free tutorials available, you can easily find if you have any particular doubt can get Financial and Managerial Accounting Answers in just few clicks.
The main object of financial accounting is to provide information to outside users such as shareholders, creditors, investors, government authorities, financial institutions, and other interested parties etc. The analysis and interpretation of financial data contained in the income statement and the balance sheet enable persons interested in the business to make meaningful judgment about the profitability, liquidity and solvency of the business firms.
Management Accounting Vs Financial Accounting
Management accounting needs the collection, analysis and interpretation not only financial or cost data, but also other data such as sales, purchase, price, product demands and measures of physical quantities and capacities. In the process, the system utilizes all techniques of financial and cost accounting including marginal or direct costing, standard costing, budgetary control, etc.
Management accounting is extension of the of cost accounting towards newer areas of management. Management accounting is mainly relating to providing economic information to managers for achieving organizational goals. Managers at each level must have a clear understanding about the objectives and goals assigned and receiving flow of relevant information. Management is needed the timely action for discharging it function, for that the required information is not be any wrong picture.
Financial accounting is mainly focus on accounting of monetary transactions of the business, i.e focus on quantitative information whereas management accounting mainly deals with both quantitative and qualitative information, control activities and to take appropriate decision making.
Financial accounting is aim with preparation profit and loss account to know the profit of the operations and balance sheet is prepared for to know the financial position of the business. Managerial accounting is concerned with providing information to managers i.e. person inside an organization who direct and control its operations.
Financial accounting should be mandatory nature, whereas there is no compulsion for management it is requirement of the entity usage.
Financial accounting is mainly report to shareholders, creditors and other interested parties while the management accounts mainly report to internal management for internal control and decision making purpose. Hope I explain management accounting vs financial accounting topics. If you need more details feel free to contact me. Iam happy to help. Accounting and Financial Management is not a easy task, you must know about some basic knowledge about two types.
Useful link on Wikipedia: Financial Accounts
Originally posted 2013-09-28 06:30:47.