You are on page 1of 2

The differences between management accounting and financial accounting include:[1]

1. Management accounting provides information to people within an organization while financial

accounting is mainly for those outside it, such as shareholders
2. Financial accounting is required by law while management accounting is not. Specific
standards and formats may be required for statutory accounts such as in the
I.A.S International Accounting Standard within Europe.
3. Financial accounting covers the entire organization while management accounting may be
concerned with particular products or cost centres.
Managerial accounting is used primarily by those within a company or organization. Reports can be
generated for any period of time such as daily, weekly or monthly. Reports are considered to be
"future looking" and have forecasting value to those within the company.
Financial accounting is used primarily by those outside of a company or organization. Financial
reports are usually created for a set period of time, such as a financial year or period. Financial
reports are historically factual and have predictive value to those who wish to make financial
decisions or investments in a company. Management Accounting is the branch of Accounting that
deals primarily with confidential financial reports for the exclusive use of top management within an
organization. These reports are prepared utilizing scientific and statistical methods to arrive at
certain monetary values which are then used for decision making. Such reports may include:

Sales Forecasting reports

Budget analysis and comparative analysis

Feasibility studies

Merger and consolidation reports

Financial Accounting, on the other hand, concentrates on the production of financial reports,
including the basic reporting requirements of profitability, liquidity, solvency and stability. Reports of
this nature can be accessed by internal and external users such as the shareholders, the banks and
the creditors.

1 Regulation and standardization

2 Time Period
3 Other differences
4 References

Regulation and standardization[edit]

While financial accountants follow Generally Accepted Accounting Principles set by professional
bodies in each country or International Financial Reporting Standards, managerial accountants
make use of procedures and processes that are not regulated by a standard-setting bodies.
Multinational companies prefer to employ managerial accountants who have a widely recognised
certification such as CGMA, Chartered Global Management Accountant certified by the AICPA and
CIMA, ACMA certified by the Institute of Cost Accountants of India [1], Chartered Management
Accountant certified by the Chartered Institute of Management Accountants, or CMA, Certified
Management Accountant certified by the Institute of Management Accountants.

Time Period[edit]
Managerial Accounting provides top management with reports that are future-oriented, while
Financial Accounting provides reports based on historical information. There is no time span for
producing managerial accounting statements but financial accounting statements are generally
required to be produced for the period of 12 previous months.

Other differences[edit]

There is no legal requirement for an organization to use management accounting, but publicly
traded firms (limited companies or whose shares are bought and sold on an open market) must,
by law, prepare financial account statements.

In management accounting systems there is no requirement for an independent external review

but financial accounting annual statements must be audited by an independent CPA firm.

In management accounting systems, management may be concerned about how reports will
affect employees behavior whereas financial management concerns are about the adequacy of
disclosure in financial statements.