Management accounting and financial accounting are both essential aspects of business that contribute to business growth. Management accounting is concerned with tracking the internal processes that a company uses to track the data related to financial statements. Financial accounting involves the collection of data to prepare financial statements. A good grasp of the differences between financial and managerial accounting can help you decide which is right for you.
What is managerial accounting?
Management accounting is the process of collecting and tracking a company's finances. With this kind of accounting, professionals can look into a company's finances and improve them. Managerial accountants help executives make good decisions and aid strategic planning. The importance of this accounting is that specific management accounting services are available for different industries.
What is financial accounting?
In financial accounting, transactions are recorded and typically displayed in financial statements. In addition to having internal and external goals, stakeholders and the general public may review these financial statements.
Knowing the main goals of each type of accounting will help you make better decisions. These differences tell you where each type of accounting fits:
1. Audience
Reports and statements management accountants produce are designed for a private audience, and the general public doesn't read them. Finance accounting is for people inside and outside the company. Financial statements are relied on by all teams in an organization - executives, regulators, and creditors.
2. Report
frequency Accounting statements are produced at the end of each accounting period. This may occur at the end of every month, quarter, or standard interval. Management accountants, however, prepare reports at less regular intervals, often to assist decision-makers or change processes.
3. Timing of transactions
Financial accounting is all about past events, dealing only with past transactions. Forecasting what may happen after taking different courses of action is often part of management accounting, making it a future-looking discipline.
4. Level of detail
Reports on managerial accounting often touch on more detailed aspects of organizations. Accounting professionals can produce reports on the profitability of different product lines or customer types to support strategic planning by executives. However, financial accounting includes the entire company with no such focused reports.
Conclusion
This article might have cleared all your doubts about the difference between the two accounting. We hope this article can guide you in your outsource accounting decision.