Financial accountancy is the field of accountancy concerned with the preparation of financial statements for decision makers, such as stockholders, suppliers, banks, employees, government agencies and owners. In other words they are prepared for the benefit of those who are not part of the day to day running of the company.
Management accounting is concerned with the providing information to the internal management to help them make correct decisions regarding various aspects of business like which project to choose on the basis cost and benefit analysis, which project to be discontinued if its costs are more than its benefits. In simple words it is basically prepared for the internal management of the company. Now let’s look at some more differences between management and financial accounting –
1. In management accounting past costs and data is not that relevant and it is concerned with future while financial accounting is concerned with the record of the financial history of the business.
2. In management accounting timeliness is more vital than its accuracy because manger need to act quickly in order to solve problems while in financial accounting audited financial statements have to be precise even if it takes time to complete.
3. Management accounting extend outside the limits of traditional accounting practices and it apply the concepts of other disciplines like economics, statistics, operations research etc. while financial accounting is bound by conventional accounting system and practices.
4. Management accounting focuses more on the parts of segments of a company like product lines, sales territories etc. rather than company while financial accounting is concerned with the reporting on business activities of the company as a whole.