WELCOME TO THE

WORLD OF ACCOUNTING
Accountingis a set of concepts and techniques that are used to measure and
report financial information about an economic unit. The economic unit is
generally considered to be a separate enterprise. The information is reported to
a variety of different types of interested parties. These include business
managers, owners, creditors, governmental units, financial analysts, and even
employees. In one way or another, these users of accounting information tend to
be concerned about their own interests in the entity.
Business managers need accounting information to make sound leadership
decisions. Owners and investors hope for profits that may eventually lead to
distributions from the business (e.g., dividends). Creditors are always
concerned about the entitys ability to repay its obligations. Governmental
units need information to tax and regulate. Analysts use accounting data to
form opinions on which they base investment recommendations. Employees
want to work for successful companies to further their individual careers, and
they often have bonuses or options tied to enterprise performance. Accounting
information about specific entities helps satisfy the needs of all of these
interested parties.
Key Differences Between Financial Accounting and Management Accounting
The following points explain the major differences between financial accounting and managerial accounting:
Financial Accounting is the branch of accounting which keeps track of all the financial information of the entity.
Management Accounting is that branch of accounting which records and reports both the financial and nonfinancial
information of an entity.
Users of financial accounting are both the internal management of the company and the external parties while the users of
the management accounting are only the internal management.
Financial accounting is to be publicly reported whereas the Management Accounting is for the use of the organization and
hence it is very confidential.
Only monetary information is contained in financial accounting. As against this, management accounting contains both
monetary and non-monetary information such as the number of workers, the quantity of raw material used and sold, etc.
Financial Accounting is done in the prescribed format, whereas there is no prescribed format for the Management
Accounting.
Financial Accounting focuses on providing information about the functioning of the entitys business to its users, whereas
Management Accounting focuses on providing information to help them in evaluating the performance and devising plans
for the future.
The Financial Accounting is mainly done for a specific period, which is usually one year. On the other hand, the
management accounting is done as per the needs of the management say quarterly, half yearly, etc.
Financial accounting is a must for any company for auditing purposes. On the contrary, management accounting is
voluntary, as no editing is done.
Financial accounting information is required to be published and audited by statutory auditors. Unlike, management
accounting, which does not require information to be published and audited, as they are for internal use only.
ANACCOUNTING INFORMATION SYSTEM(AIS) IS A
SYSTEM OF COLLECTING, STORING AND PROCESSING
FINANCIAL ANDACCOUNTINGDATA THAT ARE USED BY
DECISION MAKERS. AN ACCOUNTING INFORMATION
SYSTEM IS GENERALLY A COMPUTER-BASED METHOD FOR
TRACKING ACCOUNTING ACTIVITY IN CONJUNCTION WITH
INFORMATION TECHNOLOGY RESOURCES. THE RESULTING
FINANCIALREPORTSCAN BE USED INTERNALLY BY
MANAGEMENT OR EXTERNALLY BY OTHER INTERESTED
PARTIES INCLUDINGINVESTORS,CREDITORSAND TAX
AUTHORITIES. ACCOUNTING INFORMATION SYSTEMS ARE
DESIGNED TO SUPPORT ALL ACCOUNTING FUNCTIONS AND
ACTIVITIES INCLUDINGAUDITING,FINANCIAL ACCOUNTING
& REPORTING, MANAGERIAL/MANAGEMENT ACCOUNTING
ANDTAX. THE MOST WIDELY ADOPTED ACCOUNTING
INFORMATION SYSTEMS ARE AUDITING AND FINANCIAL
REPORTING MODULES.