MA vs FA: Differences, Users of Financial Information, and Analysis

This report offers a detailed comparison between Management Accounting (MA) and Financial Accounting (FA), highlighting their fundamental differences in terms of purpose, users, governing principles, and reporting practices. Financial Accounting focuses on providing information to external stakeholders like investors, creditors, and the government, adhering to standardized accounting principles and producing reports such as the P&L statement, cash flow statements and balance sheet. Management Accounting, on the other hand, is designed for internal use by managers to aid in decision-making, with a focus on future aspects and flexibility. The report also identifies the various users of financial information, including owners, managers, banks, suppliers, investors, lenders, government agencies, and customers, explaining how each group utilizes financial data to make informed decisions. References from books and journals are included to support the analysis. The report emphasizes the importance of financial information for informed decision-making across different organizational levels and external entities.

BUSINESS FINANCE

TABLE OF CONTENTS
Stating the difference between MA and FA with the usefulness of financial information for the
parties...........................................................................................................................................3
Different users of financial information......................................................................................5
REFERENCES................................................................................................................................7

Stating the difference between MA and FA with the usefulness of financial information for the
parties
Basis of difference FA MA
Meaning It referred as the practice of
framing final report for reflecting
the financial performance and the
position to outsiders.
It is the process of determining,
analyzing, measuring and
interpreting FA to managers for
achieving organizational goals.
Aim The main purpose of this
accounting is to facilitate useful
business related information to
the external parties. Such parties
involve creditors, customers,
investors etc. Thus, it mainly
aims at helping investors in
making for the suitable or
informed decision making.
Under the main objective is
counted more different than the
FA (Difference between
Financial and Management
Accounting, 2020). MA
information is mainly meant for
the management in order to make
informed decisions relating to the
business.
Regulatory measures It is considered as mandatory for
each and every type of the public
organization by government.
They are been governed by the
accounting standards, company
law board and the government.
It is seen at the discretion of the
management. Thus, there is no
compulsion for the company to
follow any guidelines under MA.
Governing principles The final reports under FA are
formulated on the basis of GAAP
which is seen as different for the
different countries.
There are no any standards basis
given for preparing the MA
statements, Thus, they are framed
based on the need of the
management within the work
premises.
Time period Financial statement under FA is
prepared for one accounting
period.
On other side, it does not contain
particular time period but the
main emphasize is on future
aspects.

Reporting beneficiaries It is mainly framed for outside
parties such as suppliers,
government, customers,
shareholders, government etc.
The reports formulate under MA
are deemed as useful for internal
parties as like directors,
managers, employees, CEO,
promoters etc.
Outputs FA report comprises of the P&L
statements, cash flow statements
and balance sheet.
Under this the reports are
prepared on monthly, yearly and
weekly analysis of the functions,
geographies and he products.
Relevance and validity Data under FA are considered as
100% precise and verifiable
because severything contains
evidence for the purpose of
supporting it.
It is not necessary that the data of
MA is fully verifiable. Therefore,
the data must be timely, relevant
and logical. For example- sales
cannot be forecasted accurately.
Independent audit It is mandatory to conduct
independent audit of the FA in
most of the countries. For
instance- In India, CA conducts
such type of audits.
There does have any particular
requirements for an independent
audit under MA. However, the
management on its own could
take an initiative for conducting
independent audit for sake of an
efficient and an effective
management.
Confidentiality FA statements are counted as
publicly published reports and
are been meant for public only.
Thus, there is no any question of
the confidentiality.
MA statements are prepared for
the management and the
confidentiality of such reports is
counted as the key concern
because it contains the business
secrets.
Perspective It has the historical view as
figures are based on historical
value.
It tends to provide futuristic view
as it includes anticipations of
thee expenses, income and sale
for the future by forming the
budget reports.

Different users of financial information
Owners and the senior level managers
The management of the company mainly the owners and the senior level managers makes
use of financial accounting information with purpose of taking vital business decisions for daily
and long term as well. The information is provided required exercising additional time and
efforts in order to compile and review it. But as a whole, it saves lot of time of the managers and
the business owners in gathering relevant information which cannot be collected in any other
way.
Banks
The financial organizations and institutes like banks are interested in the financial report
of the organization (Stenka and Jaworska, 2019). The main purpose is to know the credit
worthiness of the organization. Banks analyses such information to know whether the
organization is in the position to pay off its debt on time or not. In the view of this, decision is
taken whether to provide additional loan t the company or not. This, financial statements is
useful for the banks.
Suppliers
The suppliers and vendors of the company are interested in the financial report in order to
know the creditworthiness of the company. It is very important in taking decisions with respect
to providing products and services on credit to the company. Thus, for this purpose suppliers are
required to look after the financial information in order to take better decisions. It also helps in
determining whether the company is having capability to pay off the debt within the time set.
Investors
Investors are mainly the most interested parties who are interested in knowing the
financial performance of the business (Narayanaswamy, 2017). Financial statements provide
them with the information in respect to profitability, solvency, efficiency and liquidity which
helps in determining the risk so that decision can be taken regarding whether to invest in the
company or not.

Lenders
Lenders provides credit or loans to the companies on credit for which they are required to
know the financial position and performance of the business (Gaynor and et.al 2016). This can
be analyzed by looking at the financial ratios and trends which is made available through the
financial statements.
Government
The government authorities also are interested in the financial statements of the company
with the aim to ensure that the company is following all the relevant guidelines. It is used by
government for purpose like tax assessment and looking after other administrative arrangements.
Also, tax authorities conduct audits of the tax return filed by the businesses to verify the
information provided as per the accounting records. Government has nothing much to do with
the financial information, it is interested in ensuring that all the legal and regulatory requirements
are complied with.
Customers
The industrial customers are also interested in looking at the financial information of the
company in order to get information about the suppliers of the companies so as to know from
where they gather required resources. Customers are also interested in knowing whether the
company will survive for that long in order to honor its product warranties.

REFERENCES
Books and journal
Gaynor, L. M. and et.al 2016. Understanding the relation between financial reporting quality and
audit quality. Auditing: A Journal of Practice & Theory. 35(4). pp.1-22.
Narayanaswamy, R., 2017. Financial accounting: a managerial perspective. PHI Learning Pvt.
Ltd..
Stenka, R. and Jaworska, S., 2019. The use of made-up users. Accounting, Organizations and
Society. 78. p.101055.
Online
Difference between Financial and Management Accounting. 2020. [Online]. Available
through :< https://efinancemanagement.com/financial-accounting/difference-between-
financial-and-management-accounting>