This article discusses the differences between managerial accounting and financial

accounting.

Contents
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Introduction
Managerial accounting is used primarily by those within a company or organization. Reports can
be generated for any period of time such as daily, weekly or monthly. Reports are considered to
be "future looking" and have forecasting value to those within the company.

Financial accounting is used primarily by those outside of a company or organization. Financial

reports are usually created for a set period of time, such as a fiscal year or period. Financial
reports are historically factual and have predictive value to those who wish to make financial
decisions or investments in a company.

Differences
Confidentiality and type of information

Management Accounting is the branch of Accounting that deals primarily with confidential
financial reports for the exclusive use of top management within an organization. These reports
are prepared utilizing scientific and statistical methods to arrive at certain monetary values which
are then used for decision making. Such reports may include:

 Sales Forecasting reports

 Budget analysis and comparative analysis
 Feasibility studies
 Merger and consolidation reports

Financial Accounting, on the other hand, concentrates on the production of financial reports,
including the basic reporting requirements of profitability, liquidity, solvency and stability.
Reports of these nature can be accessed by internal and external users such as the shareholders,
the banks and the creditors.

Regulation and standardization

While financial accountants follow Generally Accepted Accounting Principles (GAAP) set by
professional bodies in each country, managerial accountants make use of procedures and
processes that are not regulated by a standard-setting bodies.

However, multinational companies prefer to employ managerial accountants who have passed
the Certified Management Accountant (CMA) certification. The CMA is an examination given
by the Institute of Management Accountant, a professional organization of Accounting
professionals. This certification is different and distinct from the CPA or Chartered Accountant
certificate.

Time Period

Managerial Accounting provides top management with reports that are future-oriented, while
Financial Accounting provides reports based on historical information. However, Management
accountants based their reports on historical values, while employing statistical methods to arrive
at future values.

There is no time span for producing managerial accounting statements but financial accounting
statements are generally required to be produced for the period of 12 previous months.

Other differences

 There is no legal requirement for an organization to use management accounting but

publicly-traded firms (limited companies or whose shares are bought and sold on an open
market) must, by law, prepare financial account statements.
 In management accounting systems there is no requirement for an independent external
review but financial accounting annual statements must be audited by an independent
CPA firm.
 In management accounting systems, management may be concerned about how reports
will affect employees behavior whereas management concerns are about the adequacy of
disclosure in financial statements.