Business Finance Report: Management Accounting vs Financial Accounting

This report delves into the core differences between management and finance accounts, crucial components of business finance. It elucidates the distinct characteristics of each type of accounting, including their preparation methods, the nature of information they contain (monetary vs. both monetary and non-monetary), the intended users (internal vs. internal and external stakeholders), and the adherence to specific formats. The report then elaborates on the significance of financial information for various stakeholders, such as suppliers, customers, investors, government entities, and managers, highlighting how each group utilizes this information for decision-making. The report concludes by emphasizing the importance of both management and finance accounts in providing a comprehensive understanding of a company's financial health and performance, catering to the diverse needs of its stakeholders.

BUSINESS FINANCE

Contents
INTRODUCTION.......................................................................................................................................3
MAIN BODY..............................................................................................................................................3
Explain difference between management account and finance account. Along with their usefulness to
users of financial information..................................................................................................................3
CONCLUSION...........................................................................................................................................5
REFERENCES............................................................................................................................................7

INTRODUCTION
The term business finance can be defined as those operations that contribute to the
procurement and management of capital funds in order to fulfill the financial requirements and
general goals of an organization. Management accounting is too useful for business entities in
order to take crucial decisions which become possible by help of internal reports (Atrill, 2015).
The project report is based on difference between management account and finance account. As
well as their usefulness is also mentioned in the project report.
MAIN BODY
Explain difference between management account and finance account. Along with their
usefulness to users of financial information.
Management account- Management accounting is also recognized as managerial
accountancy and can be described as a mechanism for supplying the key information to
management for choice-making. It is linked to process of preparing internal reports by help of
monetary and non monetary information (Weetman, 2010). Management accounts are utilized
solely by the firm's management department, which is the combination of financial and non
financial information. Herein, this is important to know that this account is used only by the
internal department of business entities.
Finance account- Financial accounting is the focus of the description, review and recording of
company-related financial activities. This includes the preparation of publicly accessible
financial reports (Watson Head, 2016). Under it, only financial information is included. As well
as these accounts are not limited to the internal stakeholders but also these can be used by
external stakeholders also.
Herein, below difference between management account and finance account is done below in
such manner:
Basis Management account Finance account
Preparation This is prepared under management It is prepared by help of financial

accounting. accounting.
Information Under this, both types of information
is included such as monetary and non
monetary.
On the other hand, under it only monetary
information is included.
Need The reports are generated according
to the organization's demands and
criteria.
By the end of the fiscal year, financial
accounts are typically published for one
year.
Format of
preparing
report
These accounts are prepared without
any specified format.
There is a particular format in order to
prepare financial and companies are
liable to follow this format.
Compulsor
y
This is not essential for business
entities to prepare these management
accounts (Drury, 2016).
It is very essential for companies to
prepare these accounts. Those companies
who are listed in stock exchange are
accountable to prepare these accounts.
Presentatio
n of report
Management accounts are presented
only to the internal stakeholders such
as managers, employees, board of
director etc.
These accounts are presented to the both
internal and external stakeholders. This is
so because on the basis of it, internal
stakeholders take crucial decisions as
well as external stakeholders take
decisions regards to investment in
company.
Time period There is no specific time period of
preparing these management
accounts.
On the other hand, these finance accounts
are prepared in regards to a particular
time period.
Importance of financial information for users:
Financial information is too useful for users such as internal and external stakeholders.
This is so because on the basis of it they take suitable steps (Aktas, Croci, Petmeza, 2015).
Herein, below importance of financial information for users is mentioned in such manner:

 Suppliers- When making decisions, suppliers depend on financial details. Relationship
with suppliers is a crucial consideration for company growth. Another area where
supplier relationships are handled is to include important knowledge for suppliers to
make decisions. The financial information should be appropriate, relevant and correct.
This information is accompanied by financial statements. It is essential for suppliers to
find out key financial information so that they can take suitable steps.
 Customers- Customers are interested in a firm because they are capable of supporting
also a seller that does not fulfill its needs. The business-to-business relationships ought to
be fully established by the manufacturer. Any businesses receive their information from a
single manufacturer and are thus vulnerable to the hazards of providing the chain. Inputs
not accessible may have significant consequences on an organization, in particular where
barriers to switching occur. Financial statements provide the consumers with critical facts
to determine a supplier's capability. The financial state of a company is reflected in the
balance sheet.
 Investors- There is also a requirement for a comprehensive analysis for investment
decisions. Such analysis will only be undertaken if the financial information is
appropriate. The balance sheet and financial statements offer a clear framework for
recognizing the importance of the business to creditors. The balance sheet indicates the
financial worth of the company by listing the net assets, liabilities and securities.
Investors use financial reports to determine a company's profitability to invest. Potential
dividends dependent on earnings reported in the financial report may be predicted by
investors. In fact, from the financial Report, risks linked to the transaction can be tickled.
On the basis of available financial information, investors take decisions regards to
investment in a company.
 Government- Governments are required to assess the validity of the tax reported in tax
returns from the financial statements. Government frequently tracks economic growth by
reviewing the financial results of firms from rising business sectors. On the other hand, in
the absence of proper financial information, this can become difficult for government to
take correct decision for calculation of appropriate value of tax.

 Managers- The financial information is useful for business entities in order to take right
decisions (Atrill, 2014). This becomes possible by help of prepared financial statements
which consists systematic financial information.
CONCLUSION
On the basis of above project report this can be concluded that there is a huge difference
between management account and finance account. Both have different characteristics and usage
for stakeholders. The further part of report concludes regards to importance of financial
information for different types of stakeholders including both internal and external stakeholders
such as government, customers and many more. Each of them have own interest in financial
information of companies.

REFERENCES
Books and journal:
Aktas, Croci, Petmeza, 2015. Is working capital management value-Enhancing. Journal of
Corporate Finance 30, pp, 98-113. Pdf
Atrill 2014. Financial management for decision makers, 7th ed. London FT Prentice Hall, Chapter
10- Working Capital.pdf
Atrill 2015. Management Accounting for decision makers, 8th ed. London Pearson, Chapter 6
The budgeting.pdf
Drury, 2016. Management accounting for business. 6th ed. London Cengage. Chapter 9 The
budgeting process.pdf
Watson Head, 2016. Corporate finance. 7th ed. London Pearson, Chapter 3-Working capital.pdf
Weetman, 2010. Management accounting. 2nd ed. London FT Prentice Hall, Chapter 13 preparing
a budget.pdf