Financial accounting vs Management accounting
Financial accounting vs Management accounting
What is the difference between Financial Accounting and Management Accounting?
Accounting is the process of identifying, measuring and communicating economic information about an entity to a variety of users for decision making purposes
- Financial accounting is the preparation and presentation of financial statements to allow users to make economic decisions about the entity
- Financial statements consist of
- Statement of cash flows
- Balance sheet
- Income statement
- Statement of changes in equity
- Management accounting provides economic information for internal users
- Core activities include
- Formulating plans and budgets
- Providing information to be used in monitoring and control within the entity
- Management accounting provides economic information for internal users that is then reflected in financial accounting statements for external users
Financial accounting vs Management accounting Table:
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Financial accounting
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Management accounting
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Regulations
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Bound by GAAP, Corp Act, ASX, etc
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Less formal and without prescribed rules
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Timeliness
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Historical picture of past operations
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Can be both a historical record and a projection
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Level of detail
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Quantitative in nature, concern the whole entity
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Both quantitative and qualitative, more detailed
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Main users
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External: ATO, investors suppliers, consumers, banks, employees, interested groups
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Internal: managers in the entity
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