Business Finance: Comparison of Management and Financial Accounting

This report provides a comprehensive overview of business finance, specifically focusing on the distinctions between management accounts and financial accounts. It begins by defining business finance and the roles of finance professionals within organizations. The main body of the report delves into the key differences between financial and management accounting, highlighting their respective aims, objectives, nature, and the types of users they serve. Financial accounting is geared towards external stakeholders, providing standardized reports, while management accounting supports internal decision-making with flexible, detailed information. The report then explores the usefulness of financial information to various user groups, including shareholders, suppliers, and customers, emphasizing how financial statements inform investment decisions, credit assessments, and inventory management. The conclusion reiterates the importance of both types of accounting in supporting business activities and decision-making, emphasizing that these accounts provide stakeholders with the required information to make informed decisions.

Business Finance

Contents
INTRODUCTION.......................................................................................................................................3
MAIN BODY..............................................................................................................................................3
Difference between management accounts and financial accounts..........................................................3
Usefulness to the users of financial information......................................................................................4
CONCLUSION...........................................................................................................................................5

INTRODUCTION
Business finance defined as raising money and management by corporate organizations.
Scheduling, analyzing, and monitoring activities are the obligations of the money consultant,
who is generally right near the top of a company's organisation. For very big businesses a budget
committee also takes big investment decisions. The owner-manager relatively firms the business
transaction in small businesses (Ahlström, 2019). Lower-level personnel carry out most of the
week and-to-day task of financial planning; their task involved managing revenue and
expenditure, continuous and consistent having to borrow from financial institutions, and
implementing budget data. In this report consists of difference between financial accounts and
management accounts. Moreover define usefulness of these accounts for the users.
MAIN BODY
Difference between management accounts and financial accounts
Financial accounts: Financial accounting deals with the distribution of details to external
parties. It involves the preparation of high performance documents to be used by people outside a
company, including such investors (present and prospective), creditors, financial consultants,
trade committee, government authority, etc. Financial accounting is geared in regard to the
preparing financial reports summarizing the outcomes of the operational activities for chosen
long periods and showing the financial performance of the company at specific dates.
Management accounts: Management Accounting is the description of bookkeeping
details in order to establish the initiatives to be introduced by the mangers and helps or day-to-
day actions. In those other words, it helps managers conduct all of their tasks like preparing,
organizing, hiring, handling and governing. It is the word used to denote the reporting processes,
systems and strategies that, combined with specific skills and knowledge, control group to
optimize income or minimize cost.
Basis Financial accounts Management accounts
Aim The aim of this account to provide all Whereas Managerial accounting

the financial information to outsider
stakeholders of the company.
knowledge is intended to
supports administrators decide
things within about an entity.
Objective The main objective of this account is
to make periodical reports for the
shareholders, investors and other
external parties. Along with find out
the trading results of all the
operational activities in certain period
of time at the end of task. For this
reason require to prepare profit and
loss account, balance sheet and other
statements (Naegels, Mori and
D’Espallier, 2018).
The management accounting
provide the information of
administration in regard of
preparing and controlling.
Moreover, assistance of
management to set up particular
plan to accomplish the objective of
business and conduct rationale
decision at the end. As per the
reason require to plays a
significant role and offer all the
financial information to help in
managerial decision.
Nature It is related with the monetary records
of previous activity and makes use of
data that based on the historical,
monetary, numerical and objective.
This type of accounting related
with the following year activities.
The information is using in
descriptive, subjective and
statically manner and also it is not
associated with post mortem of
historical data.
Users Financial accounts designed to supply
all the financial data by the financial
reports which are mainly used by
external user such as, investors,
government authorities and many
others. It is primarily an external
reporting system.
It is mainly prepared to provide
accurate information to all top
executives. It is primarily an
internal reporting of accounting
data to manageria personnel to
presents all the operations
efficiently and effectively.
Nature of data Financial statements are designed as All the management accounting

used per financial accounting standard that
involves different transactions that
are presented in monetary terms.
statements consists of both types
information like monetary and non
monetary.
Usefulness to the users of financial information
Knowledge on the financial statements is mainly meant to support potential investors.
Some consumers have a financial stake in the details being posted. These consumers are
instances of shareholders, investors, prospective shareholders, vendors, administrators, financial
regulators, workers, clients. Some users need data on business financial reporting to assist those
with a clear relevance in a business organization. Financial consultants and lawyers, investment
banks, people pay and news organizations, trade groups, organized labor are representatives of
these consumers. These community members with direct / indirect involvement have specific
aims and wide variation for knowledge. The focus in financial reporting has been on knowledge
for development purposes and is clearly not intended to address the particular requirements of
particular consumers or unique user classes.
There are different types of people who can use this information for the decision making
procedure such as:
Shareholders: To assess the expense and profit of their company investment, they needed
budgetary details and making investing decisions dependent on their performance.
Suppliers: They use financial reports to calculate the credit performance of a stock, and to
decide whether to depend on accounting activities. Providers ought to know if they will be paid.
Current liabilities are set according to the assessment of their client.
Customers: These individuals should use financial records to evaluate that a seller would be
capable of guaranteeing a coherent prospective inventory levels. It is especially important when a
consumer is reliant on a supplier for a given product.

CONCLUSION
As per the above report it has been analyzed that to conduct business activities require
financing because it is known as back bone of any entity. Without finance a business cannot
survive in effective manner. To maintain all the records in the business require preparing
different statements in the business that presents in front of internal as well as external
stakeholders. For this require to apply financial and managerial accounts to prepare all the
statements and according to interest of people present in front of them.

REFERENCES
Books and Journal
Ahlström, H., 2019. Policy Hotspots for Sustainability: Changes in the EU Regulation of
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Naegels, V., Mori, N. and D’Espallier, B., 2018. An institutional view on access to finance by
Tanzanian women-owned enterprises. Venture Capital. 20(2). pp.191-210.
Boskov, T. and Drakulevski, L., 2017. Strategic and Finance Management–Determining Factors
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