Difference Between Financial Accounting and Management Accounting
Difference Between Financial Accounting and Management Accounting
Accounting is a process that includes summarizing, measuring, analyzing, and recording financial transactions. It’s used to track and identify the business financial health. Accounting is one of the major keys to the business. That is why businesses like to hire accounting services. Management Accounting and financial accounting are two main branches of accounting. Today we are going to share in-depth information about both of them.
What Is Management Accounting?
Management accounting is also known as managerial accounting. It is used by the internal managers which helps the management in planning, forecasting, implementation of policies, and controlling day to day operational work of the organization. Management accounting report is used by the managers so that they can make day to day and short-term decisions for business growth. Management accounting reports contain all the financial, statistical, resources, etc information that helps the managers in decision making.
The management Accounting function area is not limited to providing financial information. It includes information about raw material, policy, work procedure, and other financial and non-financial information to aid the organization managers in budgeting, planning, changing in policies and work procedure, and making decisions for the business growth. It can be done anytime as per requirement.
What is Financial Accounting?
Financial accounting is also an important part of accounting. In Financial Accounting, We summarized the financial transitions to prepare a financial statement, including profit and loss account, income statement, cash flow statement, and balance sheet. These reports are used by the outsiders of the organization like suppliers, creditors, investors, lenders, customers, shareholders, etc.
Financial accounting presents the real financial health of the business. It works based on the various assumptions, accounting principal, going concerned, accrual, historical cost, consistency, etc. It is done once a year to make a comparison in the financial position, performance, and profitability of the company in a specific period. Financial accounting information is used by external parties and internal management. Financial accounting reports aid business management for effective forecasting, planning, and decision making.
Difference Between Financial Accounting and Management Accounting
Comparison
Financial Accounting
Management Accounting
Definition
Financial Accounting is an important accounting system in which we prepare financial statements, income statements, etc of the organization to present the real financial picture of the organization’s business.
In management, accounting provides the full relevant information to the manager which helps them in decision making.
Objective
The main objective of financial accounting is to identify what is the financial position of the organization.
The objective of managerial accounting is to assist the management in planning, and setting goals
Users
It’s used by external parties like investors and lenders.
It’s used by the internal management like managers, supervisors.
Time Period
It’s done once a year.
It’s done any time as per requirement.
Formate
Has specified format so that different organizations can easily be compared
Not specified format
Reporting Time
Quarterly, half-yearly, and yearly.
As per requirement, daily, weekly, monthly, etc.
Type of information
Monetary, verifiable information.
Monetary and company goal-driven information.
Auditing and Publishing
Need to be published and audited by statutory auditors.
No need to publish and audit.
Key differences between financial and management accounting.
Management accounting records the financial information and non-financial. Financial accounting records financial only.
Management accounting reports are used by the internal team. Financial accounting report is used by both parties internal and external.
Management accounting reports are only for organization. Financial accounting reports are published for the public sector.
Management accounting report contains the financial and non-financial information. Financial accounting report contains only financial information.
Management accounting has no specified format. Financial accounting has a specified format.
Management accounting is done at any time as per management requirements. Financial accounting is done once a year.