Many people think that both management accounting and financial accounting are same however there are certain differences between management and financial accounting, let’s look at some of them –
1. Financial accounting is concerned with recording of transactions of the company which are historical in nature, in other words it looks into past, while Management’s accounting’s looks into the future and is concerned with the future plans and it helps in making forecasts for the company
2. While financial accounting information is used by parties like shareholders, creditors, government etc…, whereas managements accounting’s information is used by the internal management of the company.
3. As management accounting’s is flexible in nature and is used by management according to their requirements it is not 100 percent accurate. While financial accounting’s is accurate because of strict adherence to the generally accepted accounting principles and that is why it is not that flexible as compared to management accounting’s.
4. While financial accounting’s statements are prepared for a year whereas management accounting’s can be prepared on weekly, monthly or on yearly basis.
5. Financial accounting’s is prepared for the purpose of knowing the profit and loss, as well as financial position of the company for a particular period, while management accounting’s is concerned with providing necessary accounting information to the management so that they can make decisions related to company effectively and efficiently.
6. Financial accounting’s scope is limited and it is a part of management accounting’s, the scope of which is wider and it also includes cost accounting, statistics etc…. along with financial accounting.