Financial Accounting vs.

Management Accounting

Diffen
Business
Business Finance
Accounting

Management accounting is a field of accounting that analyzes and

provides cost information to the internal management for the purposes of
planning, controlling and decision making.
Management accounting refers to accounting information developed for
managers within an organization. CIMA (Chartered Institute of Management
Accountants) defines Management accounting as Management Accounting is
the process of identification, measurement, accumulation, analysis,
preparation, interpretation, and communication of information that used by
management to plan, evaluate, and control within an entity and to assure

appropriate use of an accountability for its resources. This is the phase of

accounting concerned with providing information to managers for use in
planning and controlling operations and in decision making.
Managerial accounting is concerned with providing information to managers
i.e. people inside an organization who direct and control its operations. In
contrast, financial accounting is concerned with providing information to
stockholders, creditors, and others who are outside an organization.
Managerial accounting provides the essential data with which organizations
are actually run. Financial accounting provides the scorecard by which a
companys past performance is judged.
Because it is manager oriented, any study of managerial accounting must be
preceded by some understanding of what managers do, the information
managers need, and the general business environment.

Comparison chart
Financial Accounting
A financial accounting system
produces information that is used by
External vs.
parties external to the organization,
Internal
such as shareholders, bank and
creditors.

Management
Accounting
A management accounting system
produces information that is used
within an organization, by managers
and employees.

Pertains to the entire organization or May pertain to smaller business

Segment
materially significant business units. units or individual departments, in
reporting
addition to the entire organization.
Focus

Financial accounting focuses on

history.

Financial accounts are supposed to

be in accordance with a specific
Format format, so that financial accounts of
different organizations can be easily
compared. (Formal recordkeeping)

Management accounting focuses on

future & present.
No specific format is designed for
management accounting systems.
(Formal and informal
recordkeeping)

Financial accounting helps in

Management accounting
Planning and making investment decisions, and in helpsmanagement to record, plan
control credit rating.
and control activities to aid
decision-making process.
Information

Quantitative and monetary

Quantitative and qualitative;

Monetary and non-monetary

Financial Accounting
Financial accounting reports are
primarily used by external users,
Users
such as shareholders, bank and
creditors.
Reporting Well-defined - annually, semifrequency and annually, quarterly. (Verifiable)
duration

Management
Accounting
Management accounting reports are
exclusively used by internal users
viz. managers and employees.
As needed - daily, weekly, monthly.

Preparing financial accounting

There are no legal requirements to
Optional? reports are mandatory especially for prepare reports on management
limited companies.
accounting.
The main objectives of financial
accounting are :i) to disclose the
Objectives end results of the business, and ii) to
depict the financial condition of the
business on a particular date.

The main objectives of Management

Accounting are to help management
by providing information that used
by management to plan, evaluate,
and control.

Drafted according to GAAP Legal/rules General Accepted Accounting

Procedure.

Drafted according to management

suitability.

Follows a full process of recording,

classifying, and summmarising for
Accounting
the purpose of analysis and
process
interpretation of the finnancial
information.

Cost accounts are not preserved

under Management Accounting. The
necessary data from financial
statements and cost ledgers are
analyzed.