Finance and Management Accounting

financial accounting

Accountancy is a large field, which keeps on evolving. Over the past few years, accounting has expanded manifold, catering to the varied requirements of the businesses and has branched out in different types-

What are the different types of Accounting?

Financial

Management

Tax
 
Forensic

Social
 
Project

What is Financial Accounting?

In the following paragraphs, they will take a closer look what is financial and management accountancy and how do they differ from each other.

It is a method of determining, summarizing and reporting a variety of transactions from a business to bring forth the correct financial situation and performance of an organization. This field primarily deals in preparation of financial statements in the type of balance sheets, income statements, expenses and record of money flow. Financial accounting is carried out to present the financial health of an organization to its outside stakeholders, Board of Directors, creditors and other investors. The reports are time specific in order to depict how the company has performed. In a nutshell, financial accounting caters to an audience which is outside an organization.

What is Management Accounting?

What is the difference between financial and managerial accounting-

Managerial or management accounting is a field of accounting, which aims at providing financial knowledge within the company in order to assist the managers or management in planning, controlling and decision-making. It does not use the past data; in fact it is based on the present performance, future trends and challenges. The information/report produced is usually more particularized compared to outside usage. This is done so as to enhance and optimize matters related to finance thus aiding in the accomplishment of the company's goals and objectives.
financial accounting

The differences can be listed through the following categories -

The primary difference between both the kinds of accounting is evident, that management accounting is introduced internally whereas financial accounting caters to outside stakeholders. Both have significant importance of their own position. Financial is vital for existing and potential investors, while management is crucial for managers to make current and future decisions.

Optional-Financial reports are legally necessary, whereas managerial are optional.

Format- The document in financial accounting specifically follows a specific format, whereas managerial formats are casual which varies company to company.

Proven Information-Financial reports are kept with utmost precision which is necessary to support that the financial statements are correct. Managerial accounting is more about estimates and research information than proven records.

Focus-Financial accounting is primarily based on past information, oriented towards creation of financial statements which is to be distributed within and outside the company. Managerial accounting is chiefly concerned with operational reports focussing on the present and future requirements.

financial accounting