Financial accounting is associated with computation of financial transactions of a company.
Management accounting is associated with computation of financial transactions of a company and using of that data for the development and organisation of the business.
There are certain differences between these two formats of accounting.
- Primary objective:
With financial accounting, a detailed report of financial data during a certain time period is to be presented before the management and creditors. In case of management accounting, reports are to be presented for taking decisions associated with internal management.
- Associated legal provisions:
Whereas presenting financial data after a certain period of time is of prime importance for every business unit, only those business ventures that are keen on taking important management decisions look for management accounting files and that too at wide intervals.
- Reporting period:
Financial data is taken into consideration on an annual basis. When reports are submitted, further additions are made then. In comparison to that, management accounting needs to be reported to the administrative body at an immediate basis depending on which further decisions can be made.
- Publication of data:
In any company, financial accounting data is published specifically for, creditors and investors of that business, the employees associated with that organisation and general public, specifically the shareholders.
Management accounting data is published specifically for the administrative body.
- Methods followed:
The areas in which financial accounting data is segmented include: Personal, Real and Nominal Accounts. The format is revenue, expenditure and profits.
Management accounting segregates data into: Cost incurred and Revenue generated.
- Nature of the data:
Financial accounting data is concerned with what a particular firm’s yearly financial statements are. Hence, they are of past in nature. In comparison to that, management accounting deals with operational decisions that a company needs to undertake for future.
- Coverage area:
When financial accounting data is to be placed, it is purely associated with financial details during a particular year that have been placed forth by a company. Whereas, in case of management accounting, areas apart from finance such as operational decisions, management regarding further production, administrative details are taken into concern.
Links of Previous Main Topic:-
- Introduction to accounting and branches of accounting
- Preparation of final accounts
- Introduction of fund flow statement
- Introduction cash flow statement
- Ratio analysis significance of ratio analysis
- Fixed assets and depreciation meaning causes objectives methods and basic factor
- Cost accounting concept objectives advantages limitations general principles and cost sheet
- Job costing
- Introduction process costing
- Activity based costing introduction concept and classification
- Introduction inventory pricing and valuation
- Standard costing introduction
- Management accounting
Links of Next Finance Topics:-
- Differences between financial accounting and cost accounting
- Differences between cost accounting and management accounting
- Test questions management accounting
- Marginal costing
- Relevant cost for decision making
- Budget and budgetary control
- Limitations of historical accounting
- Introduction to responsibility accounting
- Introduction to financial management
- Introduction and types of dividend
- Concept of cost of capital
- Capitalization meaning
- Concepts of working capital