What is financial accounting?
Financial accounting is
a system that concerns on reporting the financial position and performance of
the organization with preparation of financial statements to various parties.
What is management accounting?
Management accounting is a system that focuses
on providing financial and statistical information for making decisions,
planning, forecasting and controlling the day to day business operations.
Differences between financial
and management accounting
accounting keeps all the monetary information of the company and provides
information for external parties such as shareholders, investors and
creditors. Management accounting keeps both monetary and non-monetary
information and provide information for internal parties such as managers,
directors and promoters.
accounting reports are required regally and should be done due to the
prescribed format and generally accepted accounting principles for a
specific time period. It is usually one year or financial year. Those
reports are prepared based on past years financial details. Management
accounting reports are not required legally and there is no prescribed
format and governing principles to prepare accounts. It is done according
to requirements of management and there is no fixed time period. These
accounts focuses present data and forecasts the future as needed.
accounting reports are required to audit by statutory auditors and
published publicly. Management accounting reports are not required to
audit by statutory auditors and they are confidential. Those reports are
used by top management of the organization.
This study is about strengths and weaknesses of
partnership and limited company ownership structures and difference between
financial and management accounting. By evaluating the strengths and weaknesses
of both structures, it is clear that partnership is less costly and easy to
manage than limited company. Both structures contain tax advantage. However,
partnership shows biggest disadvantage because of unlimited liability.
Therefore, it is important to aware about the liability risk whether you can or
cannot bear this risk. Financial and management accounting have more
differences regarding accounting reports and regal requirements. Both systems
provide many advantages to the business.