I believe that, even though we do not have intentions to major in accounting but having an understanding of how a company operates financially is very important. Especially when we have a creer objective of reaching on a ledership role. Management accounting and Financial accounting are the major basic pillars in the accounting field and both also have similarities and differences as well.
Management accounting, also referred to as managerial accounting, is used by managers and directors to make decisions regarding the daily operations of a company. A distinguishing feature of managerial accounting is that it is not based on past performance, but on current and future trends (Manson, 2017). For example, determining how much your business should charge for a new product and analyzing much revenue a future product line is creating are both examples of business problems within the field of managerial accounting. Since business leaders constantly need to make operational decisions in a short amount of time, management accounting must rely on predicting markets and future trends.
On the other hand, Financial accounting is used to present the financial health of a company to external stakeholders. This allows the board of directors, stockholders, potential investors and financial institutions to see how the company has performed during a specific period of time in the past (Williams, 2020). These reports are filed on an annual basis. If a business is considered a publicly-traded company on the stock market, the reports must be made part of the public record. In a financial accounting course, students learn how to prepare, read and analyze financial statements.
Few differences are:
1) Financial accounting heavily used by public regulators, creditors and shareholders but on the other hand, Managerial accounting information is confidential and used largely by managers only inside the company.
2) Information in financial accounting computation follows the general accepted financial accounting norms and standards and on the other hand, Information for managerial accounting computation is guided by the managerial needs identified within a specific company.
3) Financial accountancy is legally required and expected by law but Managerial accounting is not required by any law or norm.
4) Financial accounting is encompassing, focusing on the entire organization but Managerial accounting is specific offering detailed and divided information on diverse things such as tasks, department, operations, specific activities, sales, products.
Mason, M. (2017, August 28). What are the Differences Between Financial Accounting and Management Accounting? Retrieved October 23, 2020, from https://www.bentley.edu/news/what-are-differences-between-financial-accounting-and-management-accounting
Williams, E. (2020, September). PDFelement. Retrieved October 23, 2020, from https://pdf.wondershare.com/accounting/financial-and-managerial-accounting.html