Difference between Financial and Management Accounting

Business Finance

TABLE OF CONTENTS
Explaining difference between financial and management accounting along with their
usefulness for users......................................................................................................................3
REFERENCES................................................................................................................................6

Explaining difference between financial and management accounting along with their usefulness
for users
In the current times, effectual management of finance is highly required for the
attainment of organizational goals and objectives. In this regard, business units lay high level of
emphasis on undertaking practices pertaining to management and financial accounting. Both
such field of finance helps organization in getting suitable information about company’s
monetary position and performance. In this, essay will shed light on the manner in which
financial accounting differs from management. Moreover, both management and financial
accounting is concerned with company’s monetary performance. However, they differ on the
basis of several aspects in terms of users, recording of information etc.
Financial accounting (FA) implies for the process of preparing final statements which in
turn used by the business organizations for disclosing their performance and position. In other
words, it focuses on analyzing, summarizing and reporting financial transactions associated with
business (Weetman, 2019). The main motive of FA is to provide outside parties, namely
investors, creditors, government etc, with information about company’s performance. Unlike
MA, in FA, reports are prepared by business organizations by taking into account specific
regulatory guidelines disclosed by accounting standard boards. In addition to this, monetary
transactions are recorded and analyzed using specific principles enclosed in UK GAAP, IAS,
IFRS etc. In order to comply with legal aspects and maintaining the faith of stakeholders
companies prepare and publish financial accounting reports at the end of every year. Hence, it is
mainly prepared and published for external parties so that they can make effectual decisions.
In FA, data included in reports is highly verifiable because it includes evidence of each
and every transaction to support the same. Along with this, business units have accountability to
conduct audit of the accounts with the help of independent auditor. Referring this, it can be
presented that financial accounting reports contain highly reliable information and thereby aid in
effective decision making (Difference between Financial Accounting and Management
Accounting, 2020). Financial statements mainly include balance sheet, profitability and cash flow
statement. Thus, by taking into consideration financial accounting report internal and external
parties or stakeholders can take suitable decision pertaining to their concerned aspects.