Management Financial Accounting

financial accounting

Level of detail. Financial reports provide users with a broad overview of the performance & position of the business for a period. As a result, knowledge is aggregated & detail is often lost. Management accounting reports, however, often provide managers with considerable detail to help them with a specific operational decision.

Nature of the reports produced. Financial accounting reports tend to be general purpose. That is, they contain financial knowledge that will be useful for a broad range of users & decisions than being specifically designed for the needs of a specific group or set of decisions. Management accounting reports, on the other hand, are often for a specific purpose. They are designed either with a specific decision in mind or for a specific manager.
financial accounting

  Reporting interval. For most businesses, financial accounting reports are produced on an annual basis, though lots of gigantic businesses produce half-yearly reports as well as a few produce quarterly ones. Management accounting reports may be produced as often as necessary by managers. In lots of businesses, managers are provided with positive reports on a every month, every week or even every day basis, which lets them check progress often. In addition, special-purpose reports will be prepared when necessary (for example, to assess a proposal to buy a piece of machinery).

  Regulations. Financial reports, for lots of businesses, are subject to accounting regulations that try to be positive they are produced with standard content & in a standard format. Law & accounting rule setters impose these regulations. Since management accounting reports are for internal use only, there's no regulations from outside sources concerning the form & content of the reports. They can be designed to meet the needs of particular managers.
financial accounting

  Time horizon. Financial reports reflect the performance & position of the business for the past period. In essence, they are backward looking. Management accounting reports, on the other hand, often provide knowledge concerning future performance as well as past performance. It is an oversimplification, however, to recommend that financial accounting reports never incorporate expectations concerning the future. Occasionally, businesses will release projected knowledge to other users in an try to raise capital or to fight off undesirable takeover bids.

  Range & quality of knowledge. Financial accounting reports concentrate on knowledge that can be quantified in financial terms. Management accounting also produces such reports, but is also more likely to produce reports that contain knowledge of a non-financial nature such as measures of physical quantities of inventories (stocks) & output. Financial accounting places greater emphasis on the use of objective, verifiable proof when preparing reports. Management accounting reports may use knowledge that is less objective & verifiable, but they provide managers with the knowledge they need.


financial accounting