Financial Accounting vs Management Accounting

For the past hundred years we have lived in a world where the process of trading goods and services on the basis of their worth has been taking place. These actions can be defined as business activities. However, nowadays businesses have become more complex as the number of customers has vastly increased making it much more difficult to keep track of the finance and performance. This is where accounting plays its role of systematically recording, reporting and analysing the financial transactions of a business. This essay aims to compare and contrast the roles and responsibilities of a management accountant with that of a financial accountant.

Accounting allows a company to analyse the financial performance of a business and represent its position through past and future statistics. An accountant is a person in charge of conducting such a process by following certain sets of rules and regulations. Such a role is vital for any business to the point that it is considered the “backbone” of an organisation.

There are two main types of accounting, formally known as financial accounting and management accounting. Easily put, one can say that financial accounting looks at the past, whereas management accounting is more concerned with the future. There are numerous distinctions between the two forms of accounting to the point that organisations normally assign financial accountants as well as managerial accountants.

The major goal of performing financial accounting for a company is to prepare financial statements at the end of a twelve month period. Some of these statements consist of the following:

 Balance sheet – A report on a company’s assets & liabilities at a particular point in time
 Income statement – A report on a company’s income, expenses and profits over a period of time
 Cash flow statement – A report on a company’s cash inflow and outflow activities
Producing such reports is the main job of a financial accountant and the purpose of these