• Financial accounting is designed to supply information in the form of profit and loss account and balance sheet to external parties like shareholders, creditors, banks and investors while. Management Accounting is designed principally for providing accounting information for internal use of the management. Thus, financial accounting is primarily an external reporting process while management accounting is primarily an internal reporting process.
• In financial accounting only such economic events find place, which can be described in money. However, the management is equally interested in non-monetary economic events, viz., technical innovations, personnel in the organization, changes in the value of money, etc. These events affect management's decision and, therefore, management accounting cannot afford to ignore them.
• Financial accounting portrays the position of business as a whole. The financial statements like income statement and balance sheet report on overall performance or statues of the business while management accounting directs its attention to the various divisions, departments of the business and reports about the profitability, performance, etc., of each of them. Financial accounting cannot reveal what part of the management action is going wrong and why. Management accounting provides detailed analytical data for these purposes.
• Financial accounting is concerned with the monetary record of past events while Management accounting is accounting for future and, therefore, it supplies data both for present and future duly analyzed in detail in the 'management language' so that it becomes a base for management action.
• The period of reporting is much longer in financial accounting as compared to management accounting.
• Financial accounting is more objective while management accounting is more subjective. This is because management accounting is fundamentally based on judgment rather than on measurement
• There is less emphasis on precision in case of management accounting as compared to financial accounting since the information is meant for internal consumption.
skilled writter answered the question on April 24, 2018 at 18:42
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March 28, 2018
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Answers (1)
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(Solved)
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(Solved)
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