Technical Leaders - Working with the Management Team
Financial accounting vs management accounting By Aneek Gupta
1. Financial Accounting vs Management Accounting By Aneek Gupta
Consideration
Financial Accounting
Management Accounting
External vs.
Internal
A financial accounting system produces
A management accounting system
information that is used by parties external to the produces information that is used
organization, such as shareholders, bank and within an organization, by managers
creditors.
and employees.
Segment reporting
Pertains to the entire organization or materially
May pertain to smaller business
significant business units.
units or individual departments, in
addition to the entire organization.
Focus
Format
Planning and
control
Information
Users
Reporting
frequency and
duration
Optional
Objectives
Legal/rules
Accounting process
Thanks
Financial accounting focuses on history.
Management accounting focuses
on future & present.
Financial accounts are supposed to be in
No specific format is designed for
accordance with a specific format, so that financial management accounting systems.
accounts of different organizations can be easily (Formal and informal recordkeeping)
compared. (Formal recordkeeping)
Financial accounting helps in making investment Management
accounting
helps
decisions, and in credit rating.
management to record, plan and
control activities to aid decisionmaking process.
Quantitative and monetary
Quantitative
and
qualitative;
Monetary and non-monetary
Financial accounting reports are primarily used
Management accounting reports
by external users, such as shareholders, bank and are exclusively used by internal users
creditors.
viz. managers and employees.
Well-defined - annually,
quarterly. (Verifiable)
semi-annually,
As needed - daily, weekly, monthly.
Preparing financial accounting reports are
There are no legal requirements to
mandatory especially for limited companies.
prepare reports on management
accounting.
The main objectives of financial accounting are :
i)
to disclose the end results of the
business, and
ii)
to depict the financial condition of the
business on a particular date.
The
main
objectives
of
Management Accounting are to help
management
by
providing
information
that
used
by
management to plan, evaluate, and
control.
Drafted according to GAAP - General Accepted
Drafted according to management
Accounting Procedure.
suitability.
Follows a full process of recording, classifying,
Cost accounts are not preserved
and summarising for the purpose of analysis and under Management Accounting. The
interpretation of the financial information.
necessary data from financial
statements and cost ledgers are
analysed.