Differences between Financial Accounting and Management Accounting.
Basis Financial Accounting Management Accounting
Meaning It is the accounting system It is accounting system that get that get utilised for preparing utilised for the purpose of financial statements. making policies, plans and strategies in order to run their business activities in effective manner. Objectives To provide financial Is to render adequate level of information to the external support in planning and stakeholders decision making. Users Utilized by external users Used by internal users, such as such as shareholders, employees and managers. creditors and bankers, and customers. Aggregation Reports on the results of an Almost always reports at a entire business. more detailed level, such as profits by product, product line, customer, and geographic region. Reporting focus Oriented toward the creation More concerned with of financial statements, which operational reports, which are are distributed both within only distributed within an and outside of a company. organization. Proven Requires that records be kept Frequently deals with information with considerable precision, estimates, rather than proven which is needed to prove that and verifiable facts. the financial statements are correct. Standards Must comply with various Does not have to comply with accounting standards. any standards when information is compiled for internal consumption. Systems Pays no attention to the Interested in the location of overall system that a bottleneck operations, and the company has for generating various ways to enhance profits profit, only its outcome. by resolving bottleneck issues. Time period Concerned with the financial May address budgets and results that a business has forecasts, and so that can have already achieved, so it has a a future orientation. historical orientation. Timing Requires that financial May issue reports much more statements be issued frequently, since the information following the end of an it provides is of most relevance accounting period. if managers can see it right away. Valuation Addresses the proper Not concerned with the value of valuation of assets and these items, only their liabilities, so it is involved with productivity. impairments, revaluations, and so forth.