Differences between Management Accounting and Financial Accounting
Added on 2020-10-22
15 Pages5029 Words268 Views
FinancePolitical Science
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MANAGEMENT ACCOUNTING
Table of ContentsINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................1SECTION A.....................................................................................................................................1a) Differences between Management Accounting and Financial Accounting.............................1b) Cost Accounting system..........................................................................................................3c) Inventory Management systems..............................................................................................3d) Job Costing Systems................................................................................................................4SECTION B.....................................................................................................................................5Types of Managerial Accounting Reports...................................................................................5Information presented must be accurate, relevant to the user, reliable up to date and timely.....6Management accounting system and management accounting reporting is integrated withinorganisational processes...............................................................................................................6TASK 2............................................................................................................................................6Use of different techniques of management accounting..............................................................6TASK 3............................................................................................................................................8Use of planning tools ................................................................................................................10TASK 4..........................................................................................................................................11Ways in which management accounting is applied in dealing with financial problems andpreventing financial problems in an organisation......................................................................11CONCLUSION..............................................................................................................................12REFERENCES................................................................................................................................1
INTRODUCTIONManagement accounting is or managerial accounting is the process in which companiesanalyse their cost of production and operations in order to prepare the financial reports, recordsand accounts which helps the managers in decision making process. This is the process whichlooks over the events which happens in an organisation. The following report contains the detailsinformation about he use of management accounting system, difference between themanagement accounting system and financial accounting system (Wolfsgruber, 2015). Thisreport also contains the data about the cost accounting system which include direct cost andstandard cost. This report also focuses on the various types of system which are used in anorganisation such as inventory management system and job costing system. It also contains thevarious types of managerial accounting report and their importance and why they should beaccurate. To understand the importance or managerial accounting and its integration withmanagement reporting within the Excite Entertainment Ltd. This report also focuses on thedifferent types of absorption costing and marginal costing methods and benefits of each, thecompany wants to opt new methods to allocate its cost. There are various planning tools whichare used in management accounting system and their importance in decision making process areinclude in this report.TASK 1SECTION Aa) Differences between Management Accounting and Financial AccountingManagement Accounting: Management Accounting is a process which help managersto develop management reports and accounts which provide timely and accurate statistical andfinancial information which are required by the managers to make necessary decisions toimprove day to day efficiency of the company and take short term decisions for the benefits of anorganisation. It is not considered as a specific accounting system its main focus is to provideeconomic information which help managers in achieving the organisational goal (Verboncu andVRÎNCUŢ, 2015). Following are some objective of management accounting system:Planning and Policy formulation: Management accounting includes the various typesof reports which shows the accurate picture of the company and focuses on the problem,by analysing this report mangers make strategic decision to overcome those problems.1
Interpretation process: the main objective of management accounting is to present thefinancial information to top level of management to see the financial capabilities of thecompany and its current market position (Tempel, 2015).Financial Accounting: Financial accounting is a tool which is used by the management andexternal users who have direct interest in the company's operation to check the performance ofhe company by analysing its profit and earning per hare capacity. The external users include theshare holders, potential owners, investors, buyers, suppliers, government and employees. It ismainly concerned with the expense, revenues, assets and liabilities of the company and show theactual financial position of the company. The main objective of it are as follows:Ascertain the profitability: The main objective of the financial accounting includes thedetermination of the profitability of the company, to find that the business is earningprofit or incurring loss from its operations.Financial Position: The second main objective of the this is to find out the financialposition of the company and compare it with the same of its competitors. This helpsmangers to implement new position in order to improve the financial stability of thecompany and achieve the highest position in the market.Difference between Financial Accounting and Management AccountingManagement AccountingFinancial AccountingManagement accounting is a system whichgive relevant information to the managerswhich they use to make plan, policies andstrategies for the effective running of thebusiness.Financial Accounting is an accounting systemwhich involves in preparation of financialstatement of a company In order to providefinancial information.It is not mandatory for the companies to usethe management accounting process as per thelegal requirements.It is mandatory for the companies to usefinancial accounting to state its financialposition as per legal requirements.It contains both monetary as well as nonmonetary information.It contains only monetary information.These reports are prepared on the basis of therequirements of the company.Financial statements are prepared at end ofevery accounting period. It covers all the areas of the organisationIt cover only the problems related to the2
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