Accounting for Managers: Comparing Financial and Management Accounting

This report provides a comparative analysis of financial and management accounting. It highlights the differing objectives, target audiences, and regulatory frameworks of each. Financial accounting, aimed at external users, focuses on historical performance, while management accounting supports internal decision-making with future projections. The report examines how the regulatory environment, presentation, and flexibility differ between the two, emphasizing the importance of consistency in financial reporting and the adaptability of management accounting to internal needs. The report also includes references to relevant literature, providing a comprehensive overview of the subject matter and the core differences between financial and management accounting.

ACCOUNTING FOR MANAGERS
STUDENT ID:
[Pick the date]

Accounting for Managers
There are significant differences between financial and management accounting. Even
though both types of accounting aim at fulfilling information needs but the target audience is
different. Financial accounting is aimed at external users such as shareholders, lenders unlike
management accounting which is focused on internal users such as management, employees.
Financial accounting tends to represent the historical performance of the company and aids in
decision making of the external users with regards to continuing their relationship with the
business (Drury, 2016). Management accounting tends to aid in decision making regarding
the future and is especially helpful for management in taking key business decisions. The net
result of this difference in focus is that financial accounting typically represents the financial
implications of the activities carried out by the company in the past. On the other hand,
management accounting focuses on forecasting and projection of future financial
performance with regards to particular project or decision making (Bhimani, Horngren, Datar
& Foster, 2017).
The regulatory framework attached with these two types of accounting also tends to
be different. With regards to financial accounting, there is high regulation with regards to
presentation and adherence to specific accounting standards with very limited flexibility. This
is carried out in order to ensure that a comparison from past performance can be drawn. Also,
this ensures the information provided is consistent and can be interpreted by the external
users (Drury, 2016). On the contrary, there is no regulation with regards to management
accounting as the format of the report, tools used and nature of report are essentially driven
by the requirement of the management. The key objective is to aid in internal decision
making (Parrino & Kidwell, 2014).
2

Accounting for Managers
References
Bhimani, A., Horngren, C.T., Datar, S.M. & Foster, G. (2017), Management and Cost
Accounting 4th ed.Harlow: Prentice Hall/Financial Times
Drury, C. (2016) Cost and Management Accounting: An Introduction. 6thed. New York:
Cengage Learning
Parrino, R. & Kidwell, D. (2014) Fundamentals of Corporate Finance, 3rd ed. London: Wiley
Publications
3