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Q2. Distinguish between management accounting and financial accounting. |

| Financial Accounting | Management Accounting | Format: | Financial accounts are supposed to be in accordance with a specific format by IAS so that financial accounts of different organizations can be easily compared. | No specific format is designed for management accounting systems. | Planning and control: | Financial accounting helps in making investment decision, in credit rating. | Management Accounting helps management to record, plan and control activities to aid decision-making process. | External Vs. Internal: | A financial accounting system produces information that is used by parties external to the organization, such as shareholders, bank and creditors. | A management accounting system produces information that is used within an organization, by managers and employees. | Focus: | Financial accounting focuses on history. | Management accounting focuses on future. | Users: | Financial accounting reports are primarily used by external users, such as shareholders, bank and creditors. | Management accounting reports are exclusively used by internal users viz. managers and employees. | department: | preparing financial accounting is the work of finance department. | managerial accounting is not specific task of particular department. co-ordiantion of all department creates management accounting. | report frequency: | well defined - annually, semi-annually | whenever needed - daily, weekly, monthly. | Mandatory Vs. optional: | Preparing financial accounting reports are mandatory especially for limited companies. | There are no legal requirements to prepare reports on management accounting. | Time span: | Financial accounting statements are required to be produced for the period of 12 months. | No specific time span is fixed for producing financial statements. | Monetary Vs. non-monetary: | Most financial accounting information is of a monetary nature. |