Financial Accounting And Management Accounting – both are the parts of the accounting system. Financial accounting provides the basis for the collection of data and management accounting modifies that data into information in such a way so as to enable the management in taking right decisions. Thus, management accounting is treated as supplement to the financial accounting but financial accounting and management accounting are different on some basis. The difference between management accounting and financial accounting are as follow:
Difference Between Financial Accounting And Management Accounting
|Financial accounting accumulates historical data to report what has happened in the past.
|Management accounting analyses past data and adjusts these in the light of future to make plans.
|Financial accounting records only actual figures. Approximate figures have no place in financial accounting.
|There is less emphasis on accuracy. Approximation is treated as useful as figures worked out accurately.
|Financial accounting adheres to generally accepted accounting principles
|Management accounting is not based on any set of accepted rules or principles.
|In financial accounting, only those transactions are recorded which can be measured in monetary terms.
|In management accounting both monetary and non-monetary transactions are recorded.
|Financial accounting is an outcome of law. It is compulsory for every business.
|Management accounting is not compulsory i.e. optional. Every business is free to install or not to install a management accounting system.
|Financial accounts are prepared for a particular time period which is usually one year.
|There is no specific time period for the preparation of management accounts. These can be prepared as per the requirement.
|Auditing of financial accounts is compulsory.
|Management accounts are not audited.
|Financial accounts are published for the benefit of general public.
|Management accounts are prepared for the internal use of management and so these are not published.
|In financial accounting, the process of reporting is slow and time consuming.
|In management accounting there is more emphasis on furnishing the information quickly
|The main objective of financial accounting is to maintain accounts and to know the profit or loss and financial position of the concern.
|The main objective of management accounting is to provide the necessary information to the management for making plans and policies.
|Financial accounting covers the whole organisation and measures the overall performance of business.
|Management accounting specifically deals with different units, products, departments or centres.