The Differences Between Financial Accounting and Management Accounting

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Financial accounting and management accounting both prepare and analyze financial data. However, certain aspects of these two fields are very different. This article discusses the various differences between financial accounting and management accounting. The differing characteristics to be discussed include the users of information, the types of information, regulatory oversight, and frequency of reporting.

Users of Information

Financial accounting and management accounting provide information to two different user groups. Financial accounting primarily provides information for external users of accounting data, such as investors and creditors. On the other hand, management accounting provides information for internal users of accounting data. Internal users include employees, managers, and executives of the company.

Types of Information

The type of information required by the different user groups also differs. External users primarily rely on financial information about the company. They analyze this information in conjunction with general economic information, such as information about the industry in which the company operates. External users focus on broad information that reveals the overall performance of the company as a whole. In addition, financial accounting only reports information on financial transactions that have occurred in the past.

Internal users need to review financial information about the company, such as financial statement information. They also use non-financial information about the company, such as customer satisfaction levels and competitor data. Internal users focus on detailed information that reveals the performance of particular subunits of the company, such as divisions or departments. In addition, management accounting concentrates on past and present information, as well as the forecasting of future financial transactions.
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