Question 2 - Difference between Financial and Management Accounting

Accounting refers to the process of recording, classifying and summarizing in monetary

terms, the business transactions and events and interpreting the results. It is used by
entities to keep a track of their financial transactions. Financial Accounting and
Management accounting are the two branches of accounting.

Financial accounting stresses on giving true and a fair view of the financial position of the
company to various parties.

On the contrary, Management accounting aims at providing both qualitative and

quantitative information to the managers, so as to assist them in decision making
and thus maximizing the profit.

Basis for Comparison Financial Accounting Management Accounting

Financial Accounting is an The accounting system

accounting system that which provides relevant
focuses on the preparation of information to the managers
Meaning financial statement of an to make policies, plans and
organization to provide the strategies for running the
financial information to the business effectively is known
interested parties. as Management Accounting.

Compulsory Yes No
Monetary and non-monetary
Information Monetary information only.
information

To assist the management in

To provide financial
Objective
information to outsiders.
planning and decision
making process by providing
detailed information on
various matters.

Format Specified Not specified

Financial Statements are The reports are prepared as
prepared at the end of the per the need and
Time Frame accounting period which is requirements of the
usually one year. organization.

User Internal and external parties Only internal management.

 Summarized Reports about Complete and Detailed
Reports the financial position of the reports regarding various
organization information.

Required to be published Neither published nor

Publishing and Auditing and audited by statutory audited by statutory
auditors auditors.