Financial accounting is very popular, every business in Vietnam needs this department. However, not many firms have management accounting. So, what is management accounting and what is the differences between Financial accounting and Management accounting.
Management Accounting is the accounting for managers which helps the management of the organization to formulate policies and forecasting, planning and controlling the day to day business operations of the organization. Both the quantitative and qualitative information are captured and analyzed by the management accounting.
The functional area of management accounting is not limited to providing a financial or cost information only. Instead, it extracts the relevant and material information from financial and cost accounting to assist the management in budgeting, setting goals, decision making, etc. The accounting can be done as per the requirement of the management, i.e. weekly, monthly, quarterly, etc. and there is no format set on the basis of which it is to be reported.
The following are the major differences between financial accounting and management accounting:
Management Accounting is the accounting for managers which helps the management of the organization to formulate policies and forecasting, planning and controlling the day to day business operations of the organization. Both the quantitative and qualitative information are captured and analyzed by the management accounting.
The functional area of management accounting is not limited to providing a financial or cost information only. Instead, it extracts the relevant and material information from financial and cost accounting to assist the management in budgeting, setting goals, decision making, etc. The accounting can be done as per the requirement of the management, i.e. weekly, monthly, quarterly, etc. and there is no format set on the basis of which it is to be reported.
The following are the major differences between financial accounting and management accounting:
- Financial Accounting is the branch of accounting which keeps track of all the financial information of the entity. Management Accounting is that branch of accounting which records and reports both the financial and nonfinancial information of an entity.
- Users of financial accounting are both the internal management of the company and the external parties while the users of the management accounting are only the internal management.
- Financial accounting is to be publicly reported whereas the Management Accounting is for the use of the organization and hence it is very confidential.
- Financial Accounting is done in the prescribed format, whereas there is no prescribed format for the Management Accounting.
- Financial Accounting focuses on providing information about the functioning of the entity’s business to its users, whereas Management Accounting focuses on providing information to help them in evaluating the performance and devising plans for the future.
- The Financial Accounting is mainly done for a specific period, which is usually one year. On the other hand, the management accounting is done as per the needs of the management say quarterly, half yearly, etc.
- Financial accounting is a must for any company for auditing purposes. On the contrary, management accounting is voluntary, as no editing is done.
