- 1 Similarity and Dissimilarity between Management Accounting and Financial Accounting discuss in this article
Similarity and Dissimilarity between Management Accounting and Financial Accounting discuss in this article
If you want to know about a general question of management accounting vs financial accounting, you have to get a clear idea about accounting. Accounting is a procedure of the explaining some important ingredients. This actually refers to the recording process of a business transaction, classifying and summarizing and financial terms. The two important section of accounting is management accounting and financial accounting. But both of them are individual from each other. They have own characteristics and path. Management accounting refers to the providing information to the manager for all people of an organization. It is an internal process. If we want to say differently, financial accounting means the providing information to, creditors stockholders and other persons. It is as like an external process. The differences between management accounting and financial accounting I would like to discuss today. I am going to give you a clear idea of it after deep researching.
Financial Accounting: Financial accounting’s main aim is to provide records of the organization internal and external positions of an organization.
Management Accounting: The managerial accountings main goal is to provide information only to the managers which help to make the decision for the next step.
Entirety and Efficiency:
Financial Accounting: The financial accounting expresses the reports of the whole organization. Profitability is under of cost accounting. This reports on profit of the institute.
Management Accounting: The managerial accounting is the sum of product, materials, and customers. It identifying the internal problem and find out the correct solution. It gives reports on these
User and Time focus:
Financial Accounting: The mainly external person is to be a user of financial accounting. They are sensible about costing and control all of the financial matter. External user will be able to make a monetary decision. It’s focused on time from the historical perspective.
Management Accounting: The user of managerial accounting is internal persons. They are not related to economical matter but they are directly connected with the planning and controlling of an organization. Its time focused on future emphasis.
Feature and Law:
Financial Accounting: Financial accounting is variable. It can be changed with the current variability and this is the need to maintain a law to go ahead. For completing the target, it has to obey the rules of law.
Managerial Accounting: managerial accounting is not depending on inconstancy. It maintains relevancy for controlling organization. Moreover, this does not require to follow any law strictly. Some standard formats may be needed such an I.A.S international organization.
Financial Accounting: Every section of accounting has its own subject. Financial accounting has also a subject or main topic. It primarily focuses on the whole business. The financial facts of an organization are maintained by this accounting.
Management Accounting: On the other hand, management accounting works according to section, it mainly focuses on the segments of an organization.
Proven Information and report focus:
Financial Accounting: In financial management, the evidence of all economical papers or documents must be needed. Because this sector should have to prove all records. Consider these requirements financial management accounting always the emphasis on precision. It focuses on daily economic reports which are distributed both of inside and outside of the company.
Management Accounting: Management accounting doesn’t need to record anything to prove. It works according to estimating way and it’s more than the emphasis on timeliness. It focuses on such types of a topic which is actually distributed internally within an organization.
Financial Accounting: Generally, financial accounting is done yearly, if the authority wants this may be done by yearly, half-yearly. But it always presents the record within a fixed time.
Management Accounting: In the management, accounting has no any fixed time for the presentation. It continues a normal way.
Financial Accounting: Financial accounting must have to be following the GAAP. The full meanings of GAAP have generally accepted accounting principle. This GAAP can be different country wise. Cost management stands on it.
Management Accounting: The management accounting needs not to follow GAAP or any kinds of prescribed formats. If the company team wants to change any rules, then it effects on the managerial account and they stand on the organization needed.
Financial Accounting: This is imperative in financial accounting to do the independent audit. Developed countries already make rules for an independent audit in finance. Like the USA, India chattered accountants.
Management Accounting: There are no any rules for an independent audit in management accounting. But if the managing team feel required the audit the can make the decision any time.
All financial statement is expressed only for the public, there need not maintain any secrecy but the description, discussion, planning has to maintain secretly internally. For business safety, it keeps up the secret.
♦ Skill sets:
Financial accounting needs the strong base in accounting such as IFRS, GAAP, and the US. Management accounting needs budget preparation, assumption etc.
Both have some individual certified courses. Main certified courses of cost accounting are;
Association of Chartered Certified Accountants (ACCA)
Certified Public Accountant(CPA)
The main certified courses in management accounting are;
Chartered Institute of Management Accountant(CIMA)
Cost and Management Accountants(CMA)
Financial accounting is related to business profit, loss, cash and balance sheet but the management accounting is related to the definition, geographical and production function.
〉 Who uses financial accounting?
Typically, the investors and creditors that means and external user use financial accounting for making the decision.
〉 What are the main branches of accounting?
Financial accounting, management accounting, international, government, tax and non-profit accounting are the main branches of accounting.
〉 Who is called the father of accounting?
Luca Pacioli is known to all father of the accounting by publishing the double entry accounting in 1494. But actually is not the inventor of accounting.
〉 What are the golden rules of accounting?
Debit means expense and decrease, Credit means revenue and profit. This is called golden rule of accounting.
Financial and managerial accounting acts as main two part of accounting. After knowing the definition of accounting someone must have to know these on the next level. One is strongly stand out on the theory of finance and other is on the management team. As an accounting student, you have to know perfectly about it. The main point I mentioned in this article. Anybody can learn the main differences between financial accounting and management accounting from this article. I hope this article will be helpful to you.