Accounting has two distinct branches, Management and Financial Accounting. Management accounting strives to meet the needs of the managers. However, financial accounting seeks to meet the accounting needs of credit agencies such as A1 Credit and all additional users. Mainly, the differences between management and financial accounting reflect on which user they are addressing. To list a few, some differences between the two strands are as follows:
The Purpose of the Report
Financial accounting report is usually a for general purpose. In other words, they contain useful information for a wide range of consumers and options. They are not created to meet any specified requirements for a set or group of decisions. On the other hand, the Management accounting report has a specific purpose. They are designed with an individual decision that is set or made for a particular manager.
The Details in Reports
Financial reports give clients an overview of the status and functionality of the company. But often, most of the data gets aggregated and lost of details. Accounting management reports provide managers with vital information to guide them with a particular decision.
For many companies, financial reports are subject to accounting rules that seek to ensure that they are produced with routine content and in a traditional format. These rules are applied by the legislator and accounting standards. According to management accounting reports, there are no regulations from external sources since they focus only on internal use. They may be created to meet the needs of managers.
The Interval in Reporting
In almost all organizations, financial accounting reports are produced within a year, although many large organizations provide semi-annual and some quarterly reports. Management reports, however, can be generated as long as it is needed and requested by the managers. Managers receive monthly, weekly or daily reports to monitor progress. Also, reports are created for particular purposes when necessary (for example, to review a proposed purchase of a machine).
The Quality and Range of Data
Financial accounting focuses on data that could be quantified in the event of monetary terms. Management accounting also produces such reports but maybe more inclined to produce reports containing non-invasive personality information in the form of sample measurements of physical inventory and production quantities.
Financial accounting reports provide information on the company’s progress and status over the last period. In other words, they are looking backward. In management accounting reports, they offer data that concerns the company’s past and future performance.
The distinction between the two areas represents, to some extent, the way to access financial details. Managers have the form of information and control over the material they receive.
Users must be able to trust what the financial reporting standards say, what managers are willing or required to provide. Although the availability of financial information has improved over the years, fears of reducing competitive advantage and lack of customer knowledge of the reliability of forecasting data have led companies to refuse to provide consumers with the breadth and depth of information available to managers.