Financial accounting and management accounting are two terms we often hear in the financial world. Although both are branches of accounting, they are completely different in their function and scope. In this article, let’s discuss in detail the
differences between the two, beginning with their broad meaning. Financial accounting is the systematic recording of financial transactions to prepare financial statements that show the position of a business at the end of a period. External stakeholders, mainly investors, creditors, etc., use this information to judge the financial health of the company and take informed decisions. Table of
Contents On the other hand, management accounting assists an organization in making internal decisions. This accounting is useful for top-level managers like the CEO, CFO, and middle-level managers that include the General Manager, HR, etc. It is often confidential and limited to the company’s management, and it is utilized by management in bringing efficiency and effectiveness to the organization’s operations.
Difference between Financial Accounting and Management Accounting
Also read – Cost Accounting and Management Accounting Frequently Asked Questions(FAQs)1. Which of the following is a characteristic of managerial accounting? D. All of these. 2. What is the principal reason for preparing managerial accounting reports? The principal reason for preparing managerial accounting reports is to inform the management about the health of the business and suggests improvements to make informed decisions. 3. Who are the external users of accounting information? Following are the external users of accounting information: 4. Which of the following statements does not describe a characteristic of management accounting? B. Management accounting statements are required for public use only. RELATED POSTS
Sanjay Borad is the founder & CEO of eFinanceManagement. He is passionate about keeping and making things simple and easy. Running this blog since 2009 and trying to explain "Financial Management Concepts in Layman's Terms". Which of the following is a difference between financial accounting and managerial accounting?Managerial accounting focuses on an organization's internal financial processes, while financial accounting focuses on an organization's external financial processes. Managerial accountants focus on short-term growth strategies relating to economic maintenance.
Which of the following statements about the difference between financial and managerial accounting is incorrect?Financial accounting is based on generally accepted accounting practices; management accounting faces no similar constraining factors. Answer» b.
Which of the following declares the difference between financial and managerial?c) Managerial accounting pertains to both past and future items; financial accounting focuses primarily on past transactions and events.
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