1. Definition of Managerial Accounting
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The process of identifying, measuring, analyzing, interpreting, and communicating information for the
pursuit of an organization's goals.
This is also known as "cost accounting."
Managerial accounting, an internal business function that identifies, measures, records, and analyzes
financial information, also includes budgets, forecasting, cost allocation, and projected financial reports.
Differences in accounting methods depend on a company’s business operations and its industry.
The process of preparing management reports and accounts that provide accurate and timely financial
and statistical information required by managers to make day-to-day and short-term decisions.
Unlike financial accounting, which produces annual reports mainly for external stakeholders,
management accounting generates monthly or weekly reports for an organization's internal audiences
such as department managers and the chief executive officer. These reports typically show the amount of
available cash, sales revenue generated, amount of orders in hand, state of accounts payable and
accounts receivable, outstanding debts, raw material and inventory, and may also include trend charts,
variance analysis, and other statistics. Also called managerial accounting.
Comparison chart
Format:
Planning and
control:
External Vs.
Internal:
Focus:
Users:
department:
Financial Accounting
Financial accounts are supposed to be in
accordance with a specific format by IAS so that
financial accounts of different organizations can
be easily compared.
Financial accounting helps in making investment
decision, in credit rating.
A financial accounting system produces
information that is used by parties external to the
organization, such as shareholders, bank and
creditors.
Financial accounting focuses on history.
Financial accounting reports are primarily used by
external users, such as shareholders, bank and
creditors.
preparing financial accounting is the work of
finance department.
Management Accounting
No specific format is designed for
management accounting systems.
Management Accounting helps
management to record, plan and control
activities to aid decision-making
process.
A management accounting system
produces information that is used within
an organization, by managers and
employees.
Management accounting focuses on
future.
Management accounting reports are
exclusively used by internal users viz.
managers and employees.
managerial accounting is not specific
task of particular department. coordiantion of all department creates
management accounting.

2. report
frequency:
Mandatory Vs.
optional:
well defined - annually, semi-annually
Time span:
Financial accounting statements are required to be
produced for the period of 12 months.
Most financial accounting information is of a
monetary nature.
Monetary Vs.
non-monetary:
Preparing financial accounting reports are
mandatory especially for limited companies.
Objectives:
The main objectives of financial accountng are
:i)to disclose the end results of the business, and
ii)to depect the financial condition of the business
on a particular date.
Legal/rules:
Drafted according to GAAP - General Accepted
Accounting Procedure.
Follows a full process of recording, classifying,
and summmarising for the purpose of analysis and
interpretation of the finnancial information.
Accounting
process:
Center of
importance:
the financial accounitng , the origin of
preservation of knowledge gives emphasis on
recording keeeping on a whole firm basis for the
purpose of decisions by all the users of accouning
information, both external and internal.
segment
reporting:
Describe whole organization.
whenever needed - daily, weekly,
monthly.
There are no legal requirements to
prepare reports on management
accounting.
No specific time span is fixed for
producing financial statements.
Management accounting information
may be monetary or alternatively non
monetary.
The main objectives of Management
Accounting are to help management by
providing information that used by
management to plan, evaluate, and
control.
Drafted according to management
suitability.
Cost accounts are not preserved under
Management Accounting but analyses
necessary data from financial statements
and cost ledgers.
Management accounting uses cost data
for provision of information for strategic
management decisions. It is mainly
concerned with the provision of help to
the managers to asses them in the
process of decision making and design
business strategies.
Only covered part of organization (dept)
- production department.