Financial Accounting V/s Management Accounting

Financial Accounting:
Financial Accounting records monetary transactions, prepares necessary
accounts, analyses and interprets financial statements. It reveals the financial
position of a business over a particular period of time. It helps to assess the
overall performance of the organisation, efficiency in the utilisation of resources,
financial solvency and weaknesses of the organisation. In Financial Accounting,
statements are presented in standard, well-defined and accepted forms.

Objectives:
 To record the transactions affecting the business
 To prepare the necessary accounts and balance sheet
 To evaluate the results of operation over a particular period
 To report results on a year-to-year basis
 To provide information to various interested parties for taking proper
decisions.

Management Accounting:
Management Accounting is concerned with the presentation of accounting
information to management in such a way as to assist them in their managerial
functions of decision-making, planning and control. Thus, Management
Accounting deals with accounting and other information for managerial decision-
making purposes. Management Accounting acts as a decision-support system for
providing right information (both financial and non-financial) to the management
at the right time. It guides management's action and helps managers to run their
organisations smoothly.

Objectives:
 To provide management with financial data, cost data and other qualitative
information for planning and decision-making
 To get an insight into the profitability, solvency, liquidity of the organisation
 To measure and interpret the results of operations at all levels of
management with necessary comments and conclusions
 To report on the effectiveness of the organisation as regards utilisation of
resources
 To meet the changing needs of management functions
 Financial Accounting V/s Management Accounting
S. No. Points of Distinction
1 Basic function
2 Party to be served
3 Format of reports
4 Auditing of reports
5 Publication of reports
6 Period of coverage
7 Availability of reports
8 Unit of study
9 Governed by
Financial Accounting Management Accounting
Recording of monetary Supporting decisions of
transactions and the management
publication of financial by providing relevant
statements information
For use of external For use of internal
parties (may also be parties only
used by internal
parties)
Format is specified by Format is tailored to
the relevant provisions the requirement,
of the Companies Act suitability and
convenience
Financial reports are Management reports
subject to statutory are not subject to
Audit statutory audit
Annual reports are to Management reports
be published for are meant for internal
circulation among use only
external parties
Usually one year As required by the
management
Publicly available Confidential in nature
Overall performance of Detailed study of a
the organisation segment
Companies Act Needs of managers