Financial accounting vs management accounting By Aneek Gupta
Financial Accounting vs Management Accounting By Aneek Gupta
A financial accounting system produces
A management accounting system
information that is used by parties external to the produces information that is used
organization, such as shareholders, bank and within an organization, by managers
Pertains to the entire organization or materially
May pertain to smaller business
significant business units.
units or individual departments, in
addition to the entire organization.
Financial accounting focuses on history.
Management accounting focuses
on future & present.
Financial accounts are supposed to be in
No specific format is designed for
accordance with a specific format, so that financial management accounting systems.
accounts of different organizations can be easily (Formal and informal recordkeeping)
compared. (Formal recordkeeping)
Financial accounting helps in making investment Management
decisions, and in credit rating.
management to record, plan and
control activities to aid decisionmaking process.
Quantitative and monetary
Monetary and non-monetary
Financial accounting reports are primarily used
Management accounting reports
by external users, such as shareholders, bank and are exclusively used by internal users
viz. managers and employees.
Well-defined - annually,
As needed - daily, weekly, monthly.
Preparing financial accounting reports are
There are no legal requirements to
mandatory especially for limited companies.
prepare reports on management
The main objectives of financial accounting are :
to disclose the end results of the
to depict the financial condition of the
business on a particular date.
Management Accounting are to help
management to plan, evaluate, and
Drafted according to GAAP - General Accepted
Drafted according to management
Follows a full process of recording, classifying,
Cost accounts are not preserved
and summarising for the purpose of analysis and under Management Accounting. The
interpretation of the financial information.
necessary data from financial
statements and cost ledgers are