{"id":22816,"date":"2021-04-08T11:21:09","date_gmt":"2021-04-08T05:51:09","guid":{"rendered":"https:\/\/www.techjockey.com\/blog\/?p=22816"},"modified":"2025-02-19T15:35:15","modified_gmt":"2025-02-19T10:05:15","slug":"financial-accounting-vs-management-accounting","status":"publish","type":"post","link":"https:\/\/www.techjockey.com\/blog\/financial-accounting-vs-management-accounting","title":{"rendered":"What is the Difference Between Financial Accounting and Management Accounting?"},"content":{"rendered":"\n

Financial and management accounting are the two branches of a system that help companies produce statements and records for all business events and transactions.<\/p>\n\n\n\n

Financial accounting helps generate precise financial records, whereas managerial accounting helps manage quantitative\/qualitative information for profit maximization.<\/p>\n\n\n\n

<\/span>What is Financial Accounting?<\/span><\/h2>\n\n\n\n

Financial accounting is a procedure used for creating financial statements for external parties like lenders, suppliers, customers, creditors, and shareholders. The procedure is best for maintaining and managing financial records. <\/p>\n\n\n\n

Financial accounting also produces statements for a specific period, like a year or more, that comparing profits and performance is easy. These financial statements usually comprise cash flows, balance sheets, and income statements.<\/p>\n\n\n\n

<\/span>What is Management Accounting?<\/span><\/h2>\n\n\n\n

Management accounting is also known as cost accounting or managerial accounting. Management or managerial accounting is the process of measuring and analyzing financial information.<\/p>\n\n\n\n

It is performed for effective decision-making, strategizing, and planning. Also, it helps with accurate forecasting and managing of daily business operations.<\/p>\n\n\n\n

Managerial accounting further covers both monetary and non-monetary aspects for both budgeting and setting business goals. Unlike financial accounting, management accounting is for internal company stakeholders only and does not require publishing or auditing.<\/p>\n\n\n\n

Suggested Read: What is Accounting: Definiton, Basics, Types and Benefits<\/a><\/strong><\/p>\n\n\n\n

<\/span>Financial Accounting vs Management Accounting: A Quick Glance<\/span><\/h2>\n\n\n\n
 Metrics<\/strong><\/td>Financial Accounting<\/strong> <\/td>Managerial Accounting<\/strong><\/td><\/tr>
Purpose<\/strong> <\/td>For external communication of financial health. <\/td>Internally for decision making. <\/td><\/tr>
Guidelines to Follow<\/strong> <\/td>IAS, IFRS and GAAP <\/td>Not Any <\/td><\/tr>
Review Done By<\/strong> <\/td>Auditors & Regulators <\/td>Not Applicable <\/td><\/tr>
Focus Data<\/strong> <\/td>Financial Data <\/td>Financial & Operational Data <\/td><\/tr>
Approach<\/strong> <\/td>Analysing historical performance<\/td>Finding the way ahead<\/td><\/tr>
Scope & Requirement <\/strong> <\/td>Mandatory for entire company\u2019s financial health check <\/td>Can perform it on demand for any product or segment <\/td><\/tr>
Performed at What Duration<\/strong> <\/td>For a specific period like a quarter <\/td>Performed on an ongoing basis <\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

<\/span>Key Differences Between Financial Accounting and Managerial Accounting<\/span><\/h2>\n\n\n\n

Financial accounting is used to collect accounting data for preparing financial statements. Whereas managerial accounting is focused on analysing the financial data for decision making. Here are some other differences between the two:<\/p>\n\n\n

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\"Difference<\/figure><\/div>\n\n\n