The distinction in financial and administrative accounting is that the financial accounting is the

compilation of accounting records for the preparation of financial results and the internal system
and paying and transactions is management's accounting. People who have been qualified in
financial accounting are classified as Registered Public Accountants, whereas people appointed
as Licensed Management Accountants are educated in management accounts.

Financial Accounting and Managerial Accounting can be distinguished on the basis of various
factors, some of them are:

System: Financial management is just concerned with income creation and not with the entire
market method. Contrarily, management accounting explores bottleneck activities and discusses
alternative forms of rising profitability by removing issues of bottlenecks.

Aggregation: Financial reporting examines the whole company at a more detailed level.
Management accounting reports. Detailed analyses such as income by company, product size,
consumer and regional area are the subject of management accounting.

Timing: At the end of the fiscal year, annual results are due while management reports can be
released quite occasionally to provide executives with details they may operate on at once.

It is very much necessary not to choose one among the both but to know when to use each and
make a proper utilization at the perfect time. As asked by the question following are the
examples of two imaginary financial statements:

Financial Accounting

Income Statement

As on 31st March 2019

PERIOD ENDING: 3/31/2019

Total Revenue $43,213,200

Cost of Revenue $0

Gross Profit $43,213,200

OPERATING EXPENSES

Research and Development $0

Sales, General and Admin.

Non-Recurring Items $4,206,900

Other Operating Items $3,321,000

Operating Income -$4,298,700

Additional income/expense $518,600

items
Earnings Before Interest and -$3,780,100
Tax
Interest Expense $835,300

Earnings Before Tax -$4,615,400

Income Tax -$368,000

Minority Interest $35,200

Equity Earnings/Loss $0
Unconsolidated Subsidiary
Net Income-Cont. -$4,282,600
Operations
Net Income -$4,282,600

Traditional financial accounting has been developed to provide policy holders with knowledge
valuable for the measurement of business results and how we best utilize economic capital
(Zerban, 2013).The income statement above shows the final report of the year of any imaginary
company. The gross revenue for the products produced came to 43,213,200. The expense of
goods produced is the amount of all the expenses involved with the manufacture of the
commodity such as labor. Since deducting COGS from selling profits, we earn a profit margin.
Furthermore, we incorporate all other additional income or losses and instead subtract the
required taxes from the gross margin, and we collect EBIT, in which we subtract the debt at the
rate of interest, so we eventually deduct the tax in order to reach net profit.

Managerial Accounting

Sales 850,000

Less: COGS 50,000

Gross contribution margin 800,000

Less: Selling and Administrative Expenses 38000

Contribution margin 762,000

Less: Fixed costs  

Rent 100,000

Electricity 25000

Salary 75000

Total fixed cost (200,000)

EBIT                562,000

Less: Interest (12%) 67440

Earning before tax (EBT) 494,560

Less: Tax (13%) 64293

Net Income (Earning after taxes) 430267

In terms of growth, management accounting plays an significant role: for example, central policy
involves iterative budgeting by state and corporate entities and the current market-oriented
strategies are focused on private interests supporting more efficient regulation (Hopper,
Tsamenyi, Uddin & Wickramasinghe, 2009). In Case of Managerial Accounting , we take the
total sales and deduct COGS which gives us the gross profit margin, from which we deduct the
administrative expenses resulting to contribution margin which is again deducted with the fixed
cost where fixed cost contribute rent, electricity salary etc. Hence we get out EBT which
includes the interest and when interest is deducted we have EBT resulting the net income after
the deduction of tax.

References

Hopper, T., Tsamenyi, M., Uddin, S., & Wickramasinghe, D. (2009). Management accounting in
less developed countries: What is known and needs knowing. Accounting, Auditing &
Accountability Journal, 22(3), 469-514.
Zerban, A. M. (2013). The myopia of financial accounting: What the schizoid FASB waiting
for? Review of Integrative Business and Economics Research, 2(1), 250-275.