Education and Career Forum

Management accounting is nothing more than the use of financial information of management purpose." Explain this statement and clearly distinguish between financial accounting and management accounting.? Can someone give me the right answer on the same?

Financial accounting is the process recording all the financial transactions as per standards. Based on the recordings, financial statements will be prepared. Financial statements consists of Balance Sheet, Profit & Loss Account, Cash flow statement, Income & expenditure account etc., These will be useful and accessible to outsiders Ie for share holders, lenders, etc. Financial Accounting is required by law. Financial Statements are prepared based on historical information.

Where Management Accounting is preparing the reports for the people within the Organization specially for top management people. These reports will be prepared on daily basis, weekly basis or monthly basis based on the requirements. Examples of Management reports Sales & Forecasting report, Budget Analysis, Comparative Analysis, Feasibility study reports etc., Management Accounting is not required by law. Most of the cases Mangement Accounting reports future oriented.