Differences between Management Accounts and Financial Accounts

Explain the key differences between management
accounts and financial accounts and their
usefulness to the users of financial information

Difference between financial and management accounting...................................................3
Usefulness of Financial information to the users...................................................................4
REFERENCES...........................................................................................................................6

Difference between financial and management accounting
Financial accounting is a special branch of accounting that keeps a record of financial
transactions of the company. These transactions are summarized and then prepared in the
form of financial statement like income statement, balance sheet and the cash flow statement
which helps in keeping a track of the financial performance of company.
Management accounting is concerned with identifying, measuring, analysing and
interpreting the financial information to the managers so that the organization can achieve its
goals and objectives. The main objective of management accounting is to perform all the
necessary functions like planning, organizing, staffing, directing and controlling.
Financial accounting Management accounting
The major objective of financial accounting
is to provide information to external parties
like creditors, shareholders, investors,
government and consumers (Richardson,
2017). This further helps the investors in
making better informed decisions.
The main motive of management
accounting is to make informed better
decisions to improve the overall
performance of the company.
The financial accounting statements are
prepared on the basis of GAAP also known
as generally accepted accounting principles
to maintain regularity in the accounts of the
company.
There are no standard principles governing
the management accounting statements.
These statements are prepared on the
requirements of the company.
Financial accounts are prepared for the
external parties like customers, shareholders
and investors so that they can have complete
information about the performance of the
company.
Reports prepared under the management
accounting are made for the internal parties
like CEO, employees and managers to
analyse the performance of the business and
to check whether the management is
working adequately or not to achieve the
goals and objectives.
Financial accounting statements consists of
Income statement, balance sheet and cash
flow statement.
Management accounting reports are the
monthly or weekly analysis of the
management’s performance.
There is no sense of confidentiality in
financial statements as they are meant for
the use of public only.
The management accounting reports are
extremely confidential as they are prepared
only for the use of members of the
organization so that they can improve the
performance of the business (Zhang and Niu,
2019).
The financial reports are based on the past
activities thus they have a historical
perspective.
Management accounting reports aim to
improve the future performance of the
management of the company thus they have
a futuristic perspective.
Financial accounting only includes financial
information that in quantitative in nature, it
does not account for any qualitative data.
Also, the data of financial accounts is
absolutely accurate and verifiable which
means that the report has an evidence to
Management accounting includes both
qualitative and quantitative data as both of
these data are equally important for
analysing the performance and growth
aspects of the company. The data of
management accounting is not verifiable