Difference between Financial Accounting vs Management Accounting
Basis | Financial Accounting | Management Accounting |
| Account Principles | Financial Accounting is govern generally accepted accounting Principles | No such set of accounting principles & conventions are followed in Management Accounting |
| Nature | Financial Accounting is concern almost exclusively with historical records. | M.A. represents free determine as well as art information. |
| Scope | F.A. covers only the information which can be measure in terms of money | M.A. considered book quantitative information and also other information. |
| Characteristic | F.A. plays grate stress on those qualities in information which can command universal acceptability like objectives, absoluteness etc.., | M.A. emphasises those characteristics which enhance the value of information in a verity of uses like flexibility compatibility. |
| Objective | The main objective of F.A. is to supply information in the form of P&L and balance sheet to the external parties like share holders, creditors, bankers, investors, Govt etc.., | The main objective of M.A. is to help management in the formation of policies and plans. |
| Subject Matter | F.A. portrays the position of the business as whole in other words, F.A asses the results of the whole business. | M.A. deals with assessing the activities of different units departments and cost centres. |
| Statutory Obligation | The preparation of F.A. is statutory obligation. The financial statements are generally required to be prepared in the format described by law. | M.A. is optional; business is free to instate or not to instate a system of management accounting. |
| Period | F.A. are prepared for a particular period of time for ex. P& L a/c is prepared for one year. | M.A. supplies the needed information from time to time throughout the year. |
| Focus | F.A. reports reveal what had happened in the past. | M.A. takes in to accounts the past invents only to the extent the effect the future position. |
| Unit of Accounting | F.A. recognises the whole business concerns as one unit of accounts. Financial reports prepared at the end of year to highlight the operational business. | M.A. assets not only the overall position of the business concern but also the results of activities of those divisions, departments, production or sub units, which setup in the process of organisation. |
| Precision | The F.A. all transactions are recorded at actual amount involved and there is no room for use of approximate figures | No emphasis is given an actual figures sometimes approximate figures or consider more useful them actual figures to know the trends of the business. |
| Audit | Financial Statement such as P&L and Balance Sheet are subject to the registration of statutory audit under companies act India. Auditing of F.A is compulsory | M.A. cannot be auditing as it is not based on actual figures. It is possible to get management accounting audited. |
| Publication | Publication & circulation of financial accounts like P&L and Balance sheet are after made compulsory since these are for external parties | M.A. information is a confidential one & intended only for internal management views. Statements & reports are not meant for publication & circulation. |
| Communication | Promote and quick communication of information & keeping them up to date are not desired in F.A | In M.A. immediate and prompt communication of date is very much required. |
| Approach | F.A. deals with actual cost and revenues only | M.A requires prompt and timely reporting of facts even if they are less precise. |
Source: A/c Books & Notes
Tags: accounting, Accounting Principles, Balance, Balance sheet, Cost, finance, financial accounting, financial statements, Management, Management Accounting, Nature and Scope of Management Accounting, P&L account, scope, tax
By: Management Duniya
No comments:
Post a Comment