The Differences Between Financial Accounting & Management Accounting

336 words - 2 pages

Financial and management accounting are both important tools for a business, but serve different purposes. A business uses accounting to determine operational plans in the future, to review past performance and to check current business functions. Management and financial accounting have different audiences, as investors are not usually involved in the day-to-day operations of the business but are concerned about their investment, whereas managers need information quickly to make daily business ...view middle of the document...

Financial accounting reports must be filed on an annual basis, and for publically traded companies, the annual report must be made part of the public record.Management AccountingManagement or managerial accounting is used by managers to make decisions concerning the day-to-day operations of a business. It is based not on past performance, but on current and future trends, which does not allow for exact numbers. Because managers often have to make operation decisions in a short period of time in a fluctuating environment, management accounting relies heavily on forecasting of markets and trends.DifferencesManagement accounting is presented internally, whereas financial accounting is meant for external stakeholders. Although financial management is of great importance to current and potential investors, management accounting is necessary for managers to make current and future financial decisions. Financial accounting is precise and must adhere to Generally Accepted Accounting Principles (GAAP), but management accounting is often more of a guess or estimate, since most managers do not have ti

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