Difference Between Financial Accounting And Management Accounting
The main dissimilarities or difference between financial and management accounting can be pointed out as follows:
1. Meaning
Financial Accounting: Process of classifying, and recording financial transactions and preparing financial statement to show the financial health of the firm.
Management Accounting: Process of preparing and providing relevant and useful data to the management for making future plans and policies.
2. Mandatory
Financial Accounting: It is mandatory for all kinds of organizations
Management Accounting: It is not compulsory to maintain this accounting system.
3. Scope
Financial Accounting: This accounting system has limited scope and used by business firms only.
Management Accounting: It has wide scope and it is used by all types of organizations.
4. Nature
Financial Accounting: Historical nature(deals with past data only).
Management Accounting: Futuristic nature (deals with forecasting, future planning and decision making)
5. Measurement Of Data
Financial Accounting: In monetary terms only
Management Accounting: both in monetary and physical terms
6. Audience/Users
Financial Accounting: Both internal (employees, managers, directors etc.) users and external (shareholders, creditors, investors, customers, government etc.) users.
Management Accounting: It is only for management use.
7. Rules/Format
Financial Accounting: It follows systematic format, rules and procedures.
Management Accounting: It is based systematic analysis rather than fixed rules and process.
8. Purpose/Objective
Financial Accounting: To reveal financial results and present financial position of the firm.
Management Accounting: To provide essential information to the management for decision making and controlling purpose.
Also Read:
Also Read:
9. Dependency
Financial Accounting: It does not depend on management accounting.
Management Accounting: It is dependent on financial accounting.
10. Time Horizon/Period
Financial Accounting: One accounting period
Management Accounting: As per the need and requirement of the management (no fixed period).
Financial Accounting Vs Management Accounting (Comparison Chart)
I hope this post is helpful to understand the difference between financial and management accounting and to make comparison between them.
Financial Accounting Vs Management Accounting (Comparison Chart)
Basis For Difference
|
Financial Accounting
|
Management Accounting
|
Introduction
|
Identifying, classifying and recording the financial transactions of the company
|
Collecting and providing relevant financial and non financial data to the management
|
Mandatory
|
Yes
|
No
|
Scope
|
Limited
|
Wider than financial accounting
|
Nature
|
Historical
|
Futuristic
|
Types Of Data
|
Monetary data only
|
Both monetary and non monetary data
|
Users
|
Both internal and external users
|
Top level management
|
Based On
|
Systematic rules, procedure and format
|
Systematic analysis
|
Dependency
|
Not dependent on management accounting
|
Depends on financial accounting
|
Purpose
|
To know the financial position of the firm
|
To help the management in planning and decision making
|
Period
|
One accounting period
|
As per the need of the management
|
I hope this post is helpful to understand the difference between financial and management accounting and to make comparison between them.
