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Managerial vs.

Financial Accounting
Managerial accounting and financial accounting are two of the most prominent branches of accounting.
They both deal with processing information which is useful in decision-making; however, they have
differences that distinguish them from each other.
Managerial accountingprocesses economic information to be used by management in making
decisions.
Financial accounting involves the preparation of general-purpose financial statements used by various
users in making informed decisions.
The differences between managerial accounting and financial accounting can be summarized according
to the following bases of comparison:

Difference between Managerial and Financial Accounting


Basis

Financial
Accounting

Management
Accounting

1. Users

Internal and external

Internal

General-purpose financial statements can

The reports prepared in managerial

be used by external and internal users.

accounting are strictly for use by

However, they are prepared pimarily for

internal users, i.e. the management.

external users, such as the investors,


lenders and creditors, and the government.
2. Compliance

Required

Not required

with accounting

Financial accounting requires strict

Management accounting is not

standards

compliance with established accounting

required to follow accounting

standards.

standards since the only users are


the members of the management.

3. Time

Historical

Current and future

orientation

Financial accounting processes historical

Management accounting deals with

information and summarizes them in the

current problems of the company.

preparation of financial statements.

Also, management accounting


involves the preparation of budgets
and forecasts.

4. Emphasis

Reliability, verifiability, objectivity of financial

Relevance and timeliness, to provide

information

the maximum aid in management


decisions

5. Necessity

Mandatory

Optional

Financial accounting is required by law.

Management accounting is not

Companies are mandated to furnish

mandatory. However, a company that

financial statements periodically.

does not use it will suffer great


consequences.

6. Purpose of

General-purpose

Special-purpose

reports

Financial statements provide general

The financial reports in managerial

information, addressing the common needs

accounting address a specific issue

of its users.

or concern.

7. Details of

Concise

More detailed

reports

Financial statements present data in an

Financial reports carefully detail all

summarized and concise way.

information that the management


should consider in making specific
decisions.

8. Sources of

Sources within the company, i.e. the

Any source, both internal and

data

accounting records of the company

external such as interest rates,


political environment, economic and
industry concerns, etc.

9. Frequency of

Financial statements are usually furnished

Financial reports in management

reports

monthly, quarterly, annually.

accounting are prepared as the need


arises.

There have been arguments as to which between financial accounting and managerial accounting is
more important. However, it is somewhat pointless to argue on which is more important. Each has its own
purpose in the business environment.