Difference between management Accounting and Financial Accounting

Financial Accounting deals with the preparation of financial statements like profit and loss account and
balance sheet. While management accounting involves decision making. Following are the differences
between both. .
Difference between management Accounting and Financial Accounting

Basics Management Accounting Financial Accounting

Management accounting is essential for Purpose of financial accounting is to record various
Purpose management in formulating policies and plan. It transactions and to know financial position of the
helps in decision making firm.

Accounting Financial accounts are governed by Generally

Not governed by any principals
rules Accepted Accounting Principles (U.S. GAAP)

In management accounting no emphasis is

Actuals/estima In financial accounting only actual figures are
given to actual figures, rather it is based upon
tes recorded.
estimated figures.
 Cont.

Difference between management Accounting and Financial Accounting

Basics Management Accounting Financial Accounting

Often presents segments of an organization (e.g., Presents overall company information in

Level of detail
products, divisions, departments) accordance with U.S. GAAP

Information Non Monetary Monetary

Users Internal External

Preparation of Management Accounting records Preparation of financial statements is

Mandatory
is not compulsory. compulsory under companies Act 1956.

Financial accounts are to be published under Management accounting is done for

Published
companies act. management and is not published
Management Accounting records are not Financial accounts are to be audited under
Audited
audited. companies act
Difference between Management Accounting and Cost Accounting

Both Management and cost accounting are meant for internal users. But still there are differences
between both. Following are the differences:
Difference between Management Accounting and Cost Accounting

Basics Management Accounting Cost Accounting

Objective The primary objective of management accounting is to provide necessary The main objective of cost accounting is to assist the
information to the management in the process of its planning, controlling and management in cost ascertainment and cost control
decision-making.

Data Management accounting uses both quantitative and qualitative data. It also uses Cost accounting system uses quantitative cost data
those data that cannot be measured in terms of money. that can be measured in monitory terms.

Audit No statutory requirement of audit for reports. Statutory audit of cost accounting reports are
necessary in some cases, especially big business
houses.

Scope Management Accounting has a wider area of operation like tax, budgeting, The scope of Cost Accounting is limited to cost data
planning and forecasting, analysis etc

Nature Management accounting is generally concerned with projections of figures for Cost accounting uses both past and present figures
future

Interdependence Management accounting is dependent on cost and financial accounting Cost accounting is not dependent on management
information accounting.