Financial Accounting and Management Accounting

Question

Describe distinguish between the term Financial Accounting and Management Accounting?

Answer 1

1) Financial Accounting reports are employed by outside parties like creditors, shareholders, and so forth. While Management Accounting reports are employed through managers within the organization 

2) In Financial Accounting, only past financial transactions are considered and don’t consider non financial transactions while in Managerial Accounting accent is on decisions affecting the prospect, therefore it might consider future data and non financial factors.

3) Upholding of preparation of financial statements and financial accounting records is a lawful requirement while Management Accounting is not at all lawful requirement. Furthermore, these systems have their own reporting formats.

4) In Financial Accounting, precision of information is need while in Management Accounting properness of information is needed.

5) In Financial Accounting, merely summarized data is made for the whole organization while in Management Accounting detailed reports are made regarding products, departments, customer and employees.

6) Preparation of Financial Accounting is depends on Generally Accepted Accounting Principles whereas Management Accounting doesn’t follow these principles to prepare reports.

7) Financial reports make by the Financial Accounting are needed to be precise while accurateness is not the requirement of management accounting.