Mohammed Roohul Ameen
Assignment MBA 1
Explain the differences between Financial Accounting and ManagementAccounting.
is used primarily by those within a company or organization. Reports can begenerated for any period of time such as daily, weekly or monthly. Reports are considered to be "futurelooking" and have forecasting value to those within the company.
is used primarily by those outside of a company or organization. Financial reportsare usually created for a set period of time, such as a fiscal year or period. Financial reports arehistorically factual and have predictive value to those who wish to make financial decisions orinvestments in a company.
Confidentiality and type of information
Management Accounting is the branch of Accounting that deals primarily with confidential financialreports for the exclusive use of top management within an organization. These reports are preparedutilizing scientific and statistical methods to arrive at certain monetary values which are then used fordecision making. Such reports may include:
Sales Forecasting reports
Budget analysis and comparative analysis
Merger and consolidation reportsFinancial Accounting, on the other hand, concentrates on the production of financial reports, includingthe basic reporting requirements of profitability, liquidity, solvency and stability. Reports of thesenatures can be accessed by internal and external users such as the shareholders, the banks and thecreditors.
Regulation and standardization
While financial accountants follow Generally Accepted Accounting Principles (GAAP) set by professionalbodies in each country, managerial accountants make use of procedures and processes that are notregulated by standard-setting bodies.