Differences Between Financial Accounts and Management Accounts

This article discusses the differences between financial accounts and management accounts, including their information/data, frequency, regulatory bodies, future orientation, main object/task, audit, and usefulness to users of financial information. It also explores how financial accounts and management accounts are used by managers, shareholders, prospective investors, suppliers, government, and employees. The article concludes by emphasizing the importance of preparing both financial and management accounts for the efficiency and confidence of various stakeholders.

BUSINESS FINANCE

Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Financial Accounts vs Management accounts:.......................................................................3
Usefulness of financial accounts and management accounts to users of financial information:
................................................................................................................................................5
CONCLUSION................................................................................................................................6
REFERENCE...................................................................................................................................7

INTRODUCTION
Business finance implies to a specific part of management practices wherein managers
decide on their potential investment project based on identification of financial and managerial
accounts. Executives use finance related accounts and management's accounts for such a task.
The study primarily covers a detailed discussion on the core differences in management accounts
and financial accounts (Gowthorpe, 2005). Moreover, this also discuss about major usefulness of
these accounts for the users of financial data/information.
MAIN BODY
Financial Accounts vs Management accounts:
Financial accounts: These imply to collection of particular accounts that document business
transactions of day-to-day process of the company. Contexts of the financial events / transfers
documented in the financial accounts are revenues from sale of organisation products
or offering services to purchaser or service recipient and paying debts later. Financial
executives/managers make smart decisions by using financial information of financial accounts
for planning budget and manage financial resources. Such reports are chiefly used for the
reporting of annual financial reports by management (Kacer, Peel and Wilson, 2018).
Management accounts: These are critical elements of financial management accounting that
focuses on capturing all vital transaction records and documenting organizational major
components that are advantageous for the managerial decision-making. Such accounts are being
used explicitly for organization's internal reasons of course by executives. This concerns
organizational qualitative dimensions since it not only tracks and publishes monetary/fiscal data
or details, but also publishes non-financial and monetary details.
For a clearer comprehension of the principles of the financial accounts and
management accounts, the distinctions between the two will aid, as stated below:
Difference basis Financial Accounts Management Accounts
Information/Data
dealing with
financial accounting centres
chiefly on money - related /
financial information/data, and
therefore only incorporates
quantitative facets.
The management processes or
manages both fiscal and non-
monetary info. Therefore, qualitative
and quantitative both aspects are
covered.

Frequency Usually, formulated each year No set time frame, prepared
according to goals and objectives of
the upper management.
Regulatory bodies These accounts must also be
produced in accordance
with principles and the statutes
related to IAS. Also, here GAAP
should also be considered while
preparing financial accounts. It
enables a simple comparison of
the financial statements/accounts
of different global organizations
(Nørreklit ed., 2017).
At other side no legislation governs
managerial accounting
activities/tasks, and therefore it
emphasizes on management policies
and internal organisational decisions.
These accounts are therefore not
created as per specifications of IAS.
Further it does not have specific
format specifications for recording
managerial events.
Future or past
orientation
It collects facts and activities that
have already happened in the
previous period.
Information hereunder may be
forward-looking based on the
requirements of the managing
executives.
Main object/ task Financial results/outcomes in
these accounts must be accurate in
the effort to gain/retain the
confidence/trust of shareholders,
lenders and federal agencies.
This in turn, lead to organizational
stability stemming from
transactions/events that these
stakeholders are making
with Enterprise.
Such accounts must be given access
to managers as soon as reasonably
practicable to give administrators
time to undertake actions/make
decisions to the benefit of all
stakeholders of organization.
Audit These are disclosed/reported to
the all internal as well as external
stakeholders/users,
e.g. shareholders, creditors,
While these accounts are usually
used by company and potentials to
exploit data thus becomes minimal.
The aspect that these are intended

financial institutions/banks,
government agencies, etc., and
thus may contradict their
truthfulness. The thing
that financial statements are
correlated to
historical/past accounts also leads
to necessity that financial
statements / reports must be
credible because these can be
employed to conceal unintentional
irregularities and frauds.
for strategical planning leaves
risks of lack of integrity
and designed to cover up
fraud/errors. Management accounts
therefore aren't subjected to audit
criteria due to aforementioned fact
(Bai, 2019).
Usefulness of financial accounts and management accounts to users of financial information:
Here is a detailed review on the relevance and usefulness of such accounts to various financial
information users, are as follows:
To Managers: These include financial and management accounts for managing affairs of the
company by assessing its fiscal outcomes and standing, as well as strategically aligned strategic
decisions. Individuals are the key users of the management accounts, and also have
complete management account information. These users use management accounts to undertake
managerial-decisions and also to make organizational policies more efficient.
To Shareholders: These users use financial statements to calculate their business
investments risks and returns, as well as make investment decisions based on their analysis. In
addition, shareholders do not have substantial access to records of the managerial accounts.
Although they assess their role in the company as well as potential growth of organisation,
through information presented in management accounts (Tenhunen, 2018).
To Prospective Investors: Data about financial accounts are required to assess the efficacy
of investments in a business. The investors should foresee expected return based on
income/profits published in the financial accounts. Furthermore, investments risk can be
determined through Financial Accounts. They use information available from managerial
accounts to make crucial investment decisions.

To suppliers: They want financial accounts and its information to assess financial health of a
corporation and evaluate whether credit should be provided to company. Suppliers must be
aware of how to reimburse them. Credit requirements are calculated in accordance with their
clients' assessment of financial sustainability. These users typically have accesses to managerial
accounts so, if they are available, they could more accurately predict the organization's
performance.
To Government: Governments require financial accounts information to assess accuracy of tax
reporting in tax filings. Government also preserves economic growth information by analysing
financial statements of companies from different industries. The govt and its multiple
organizations have access of information management account information/data in manner
mandated by law so that they can determine real output of the business for own purposes through
such a information (Bennett and James, 2017).
To Employees: Financial accounts are used to assess the sustainability and effect of company on
its future pays and job protection. They have restricted exposure to managerial accounts, but can
assess the sustainability of the company to ensure their function within the organization
in longer term with readily available information.
CONCLUSION
From the above study it has been analysed that financial as well as management accounts are
crucial elements of a business that allows various users and actors to decide on organization
based on details recorded in such accounts. Those are the main attributes of an organization. In
order to improve their efficiency and increase the confidence of various stakeholders of an
organization, an enterprise must draw up financial and management accounts.

REFERENCE
Books and Journals:
Gowthorpe, C., 2005. Business accounting and finance for non-specialists. Cengage Learning
EMEA.
Kacer, M., Peel, D.A., Peel, M.J. and Wilson, N., 2018. On the persistence and dynamics of Big
4 real audit fees: Evidence from the UK. Journal of Business Finance &
Accounting, 45(5-6), pp.714-727.
Nørreklit, H. ed., 2017. A philosophy of management accounting: A pragmatic constructivist
approach. Taylor & Francis.
Bai, X., 2019, September. The Organic Integration and Innovative Development of Financial
Accounting and Management Accounting. In 2019 3rd International Seminar on
Education, Management and Social Sciences (ISEMSS 2019). Atlantis Press.
Tenhunen, M.L., 2018. THE IMPORTANT NEED OF GENERAL ACCOUNTING AND
MANAGEMENT ACCOUNTING. Euromentor Journal-Studies about
education, 9(04), pp.37-43.
Bennett, M. and James, P. eds., 2017. The Green bottom line: environmental accounting for
management: current practice and future trends. Routledge.