Financial Accounting VS Managerial Accounting ?

Financial and managerial or management accounting are both important tools for a business, but serve different purposes. A business uses accounting to determine operational plans in the future, to review past performance and to check current business functions.

 

Let us first understand their significance:

Financial accounting has its focus on the financial statements which are distributed to stockholders, lenders, financial analysts, and other users outside of the company. It presents a specific period of time in the past and enables the audience to see how the company has performed. It must be filed on an annual basis, and for publicly traded companies, the annual report must be made part of the public record.

Managerial accounting has its focus on providing information within the company so that its management can operate the company more effectively. It is based not on past performance, but on current and future trends, which allows estimation and not exact amounts. 

 

Now, we can draw their main difference:

Management accounting is presented internally, whereas financial accounting is meant for external stakeholders. Although financial accounting is of great importance to current and potential investors, management accounting is necessary for managers to make current and future financial decisions. Financial accounting is precise and must adhere to Generally Accepted Accounting Principles (GAAP), but management accounting is often more of a guess or estimate, since most managers do not have time for exact numbers when a decision needs to be made.

Managerial accounting has its focus on providing information within the company so its management can operate the company more effectively._It provides instructions on computing the cost of products st a manufacturing enterprise. _Financial accoy has its focus on the financial statements which are distributed to stockholders, lenders, financial analysts and others outside of the company. _Courses in financial accounting cover the general accounting principles which must be followed when reporting the results of a corporation's past transactions on its balance sheet, income statement, cash flow statement، and statement of changes in stockholders equity.

Financial Accounting is to Shareholders while Management Accounting is to Management

Financial Accounting is historic while Management accounting is based on future predictions

Financial Accounting is periodic while Management Accounting is done when management needs

Financial account preparation is guided by GAAP and IFRS. this is not the case in Management Accounting

Financial Accounting has a preparation format. There is no format for Management Account

Financial accounting shows a picture of financial position of the company while management accounting looks at specific aspects of the business to aid management decision

Thanks for invitation

Financial accounts are prepared for individuals external to an organization eg shareholders customers supplies , employees etc

Management accounts are prepared for internal managers of an organization.

However ,it is important to note that the data to prepare financial accounts and management accounts are the same. The difference between the financial accounts and management accounts arise because the data is analysed  differently.

 

I agree with colleagues Answers

Gents , 

its will be more fruitful to explain the difference in brief and ease the meaning : 

1- financial accounting : represents the financial position for a certain period and supports the analytical transactions . 

2- managerial accounting : represents the process of  day to day decisions for the current period . 

 

A common question is to explain the differences between financial accounting and managerial accounting, since each one involves a distinctly different career path. In general, financial accounting refers to the aggregation of accounting information into financial statements, while managerial accounting refers to the internal processes used to account for business transactions

though I agree with ANDREW PONTE - my experience tells me differently. 

 

the difference is this ?

Financial Accounting VS Managerial Accounting 

Non Fiction                VS Fiction

Financial accounting deals with a history of previous periods, as well as the processing of data in the current period. The accounting cycle is crucial to financial accounting standards and processes, ensuring that data is compiled and reported in a consistent way, so that anyone who's familiar with accounting's general practices can understand. Financial accounting includes no future projections or predictions. Although financial accounting reports may be useful for future use such as forecasting, the forward view is more definitive of managerial accounting. Once again, the company that has the most accurate "crystal ball" on future market activity has the advantage, underscoring the importance of effective managerial accounting, as well as its potential weaknesses. A company that closely ties itself to inaccurate managerial accounting projections may experience challenges adapting to actual market conditions.

Management Accounting information: financial and operating data about an organization's activities, processes, operating units, products, services, and customers:e.g., the calculated cost of aproduct, an activity, or department in a recent time period.

Management Accounting systems provide information to managers and employees within an organization.

Financial Accounting : the process of producing financial statements for external constituenciespepole outside the organization, such as shareholders, creditors, and governmental authorities. this process is heavily constrained by standardsetting, regulatory, and tax authorities and the auditing requirements of independent accountants.

Financial Accounting reports,in contrast, communicate economic information to individuals and organizations that are external to the direct operations of a company, such as shareholders, creditors,regulators, and governmental tax autnorities

            MANAGERIAL ACCOUNTING                   

Audience:-internal:workers,managers, executives

Purpose :- Inform internal decisions made by employees and managers;                    feedback and control on operating performance.

Timeliness:- Current; future oriented

Restrictions:- NO regulations; systems and information determined by                             management to meet strategic and operational needs.

Type of information:- Financial plus operational and physical                                               measurements on processes, customers, and competitors.

Nature of information:- More subjective and judgmental; valid, relevant,                                       accurate.

Scope:- Disaggeregate; inform local decisions and actions.

                     FINANCIAL ACCOUNTING

Audience:- External: stockholders, creditors, tax authorities

Purpose :- Report on past performance to external parties; provides                         a basis for owners and lenders to contract.

Timeliness:- Delayed; historical.

Restrictions:- Regulated; rules driven by generally accepted accounting                         principles and government authorities.

Type of information:- Financial measurements only.

Nature of information:- Objectives, auditable, reliable, consistent,                                                 precise.

Scope:- Highly aggregate; report on entire organization.

 

Financial Accounting based reports tells third parties how well a company performed in past.

Mangerial Accounting based reports help management while capital decision making for the future plans for the existing senario of thecomany