| Management accounting and financial accounting | | | | management accounting formats and systems |
| comprise the two main branches of accounting in | | | | vary widely among and within organisations. |
| general. To those unfamiliar with field, such a | | | | = Scope = |
| distinction may seem gratuitous. However, the | | | | Financial accounts represent an aggregate of |
| distinctions accounting are not merely nominal. | | | | entities, activities and operations for the whole |
| Generally, data related to events, transactions and | | | | organisation, including any subsidiaries. The focus |
| activities within an organisation form the common | | | | of management accounts is far more specific, as |
| source of information for management and | | | | it deals with particular activities, sections or |
| financial accounting. There are six major | | | | departments. Therefore, it has an inherently |
| differences between them. | | | | narrower focus than financial accounting. |
| = Purpose = | | | | = Content = |
| Financial accounting is designed to state the | | | | Financial reports usually deals with financial |
| financial position of an organisation and provide | | | | information. In other words, most things in a |
| information about its revenue generation/profits | | | | financial report are of a monetary nature (having |
| to stakeholders. It is geared towards external | | | | a dollar value). Management accounts incorporate |
| information users- primarily regulators, | | | | both monetary and non-monetary measures, i.e. |
| government and owners. Management accounting | | | | financial and non-financial information. This does |
| has an internal focus, on the other hand. | | | | not mean that financial reports are not complete- |
| Accountants/accounting clerks prepare such | | | | just that data needs to be transformed to |
| information for internal managers, who use it to | | | | monetary figures for financial reports. After all, |
| aid and facilitate planning, decision-making and | | | | financial reports do not account for productivity or |
| control. | | | | employee morale. |
| = Legal requirement | | | | = Period covered = |
| Mgt. accounting is optional - used solely at the | | | | By nature, financial accounts provide a historical |
| discretion of an organisation's managers. External | | | | representation of an organisation's operations for |
| stakeholders usually do not even view | | | | a defined period. Management accounts can |
| management accounts. This is because there is no | | | | provide aspects of past operations and |
| legal requirement for any organisation to prepare | | | | projections for future operations, since they are |
| management accounts. Financial accounts are for | | | | also planning and decision-enabling tools. |
| external users. However, only limited liability | | | | The differences between te two types of |
| companies bear the legal obligation to produce | | | | accounting is significant to management and |
| these accounts. | | | | accountants. Since information has objectives that |
| = Format and standards = | | | | information users define, production of |
| The formats of management accounts are | | | | management accounts and financial accounts |
| exclusively at the discretion of managers. | | | | consider the needs of these users, whether |
| However, financial reports must adhere to | | | | internal or external. Since financial reports for |
| International Financial Reporting Standards and | | | | limited liability companies are mandatory and |
| International Accounting Standards. This makes | | | | regulated, it merely requires conformity. |
| financial reports virtually standardized while | | | | |