Financial vs Management Accounting there Aims And objectives
Financial accounting and managerial accounting are two of the four largest branches of the accounting discipline. These two areas have their differences in the way they operate. This article will looks at some of the major differences between these two.
Financial vs Management Accounting
Financial accounting is a branch of accountancy that provides information to users outside an organization such as investors, creditors, suppliers and governmental agencies. Generally, financial accounting focuses on standardization and general acceptance principles to ensure consistency in the form of financial statements.
It is a process that has developed over time based on accepted practices and rules. Financial accounting uses accrual method accounting while managerial accounting uses cost method of accounting.
Managerial accounting is used to track actual costs, revenues and profits which can be used by managers to make decisions regarding future business strategies or plans. Managerial analysis helps in decision making within an organization by enabling managers to see results of decisions made earlier as well as changes due to new factors or occurrences.
Details regarding the regulation of financial accounting can be found in the Financial Accounting Standards Board (FASB). Details surrounding uniformity of financial accounting can be found in the AICPA’s Statement on Auditing Standards (SAS) No. 109. The purpose of this article is to explain what financial accounting is, why it is regulated, how it is regulated, and how it differs from managerial accounting.
The Regulation and Uniformity
Regulation and Uniformity Of financial accounting and managerial accounting are two of the most important facts that you should know about accounting. Accounting is a complex and broad subject. Accounting is also a profession that deals with money. Therefore, it is essential for individuals who are involved in financial and managerial accounting to understand the concepts that make up these terms.
For clear understanding;- A regulation is a rule. It is a principle that is enforced by an authority. The authority may be a person, a group of persons or as in the case of many laws in the state. Regulating something means to control it with rules.
A rule is a statement which describes how we are supposed to behave in a given situation. It contains information about behaviour that is considered appropriate, or about what we are not allowed to do. There are two kinds of rules which are Regulations and Rule calculation.
Businesses are required to use the same accounting principles for income statements and balance sheets. This requirement is known as Uniformity of financial accounting. Many businesses also have their own methods for internal control over their accounting practices, which is known as Regulation of financial accounting. These two concepts together form the basis of U.S. accounting regulation.
Understanding Past and Present Use
Two main types of accounting: financial and managerial. Financial accounting is done for the financial sector those working with taxes, investments and bank loans. Managerial accounting is done for a company’s management team. Both use the same basic information and concepts but focus on different topics.
There are two basic uses of financial accounting: reporting and planning. The financial statements give historical, financial information present. They do not provide insight that can be used to make future operating decisions. However, some things can do with financial statements are:
* Assess the performance of your business over time
* Measure its profitability
* Calculate its net income
* Determine its cash flow
Managerial accounting looks critically at past performance and creates a business forecasts. Business decisions should be informed by this type of accounting.
Financial accounting reports are useful for people who want to know the financial performance of a company. Financial accounting reports are compiled by accountants and auditors. Financial accounting is nearly always based on national standards.
Managerial accounting is different from financial accounting in that it focuses on how resources are being used within a company. Managerial accounting is based on how a business will achieve its goals rather than what the business has done in the past. Managerial accounting reports include information about the costs of materials used in production, labor costs, personnel information, and other factors such as where the business is putting its money.
Financial Accounting;-reports are mainly used by investors, creditors, and others outside of the company that can affect performance. The main reason for this is that financial accounting reports use standardized methods and formats so that they can be compared across companies.
:Managerial Accounting;- reports are mainly used by management within a company to improve performance. The main purpose of managerial accounting is to help management measure how well they can performing against their goals as well as achieved.
Advantage of managerial accounting reports
 Is the ability to provide deep insight into a company’s operations. Managers can look at how each department is performing independently instead of how they all fit together as one big picture.
[2[ It makes it easier for managers to compare data across different departments or across multiple similar companies in the same industry.
Disadvantage of managerial accounting reports
ack of consistency between companies’ reporting formats and styles. There is no set standard for what should be included in a report or what the report should look like.
Managerial accounting provides detailed reports related to production or service that are based on actual transactions recorded during a particular period of time while financial accounting provides summary reports which provide a general overview of activities within an organization for a given period. Financial statements prepared by financial accountants include balance sheet, income statement, statement of retained earnings and statement of changes in equities.