Both managerial and financial accountings have entirely different users. For instance, financial accounting helps organizations to present their financial status to various stakeholders like board of directors, investors and financial institutions. Financial accounting also presents the monetary details of an organization for a specific period in the past and helps the audience to understand how the company has performed during the above period. On the other hand, managerial accounting helps managers to take day to day business decisions. In other words, managerial accounting has nothing to do with the past performance of a business organization, but with the current as well as future trends. More importantly, as managers are often compelled to take fast decisions in a continuously changing business environment managerial accounting depends to a good extent on clues about future market trends. Furthermore, financial accounting deals only with monetary information whereas managerial accounting deals with non-monetary information as well (Shurbi, 2014).
As the objectives of both financial and managerial accounting greatly differ, both follow different accounting principles. For example, as financial accounting is meant to provide information to outsiders, it follows specific, accepted formats. On the other hand managerial accounting intended to assist the management in taking various short-term decisions follows a flexible internal formats. Also, financial account statements are prepared towards the end of the accounting period even as managerial account statements are prepared from time to time depending upon necessity. More specifically, financial accounting should strictly follow Generally Accepted Accounting Principles (GAAP) as against management accounting that follows informal internal formats (Francis, 2017). Unlike management accounting, the scope of financial accounting goes far beyond the internal requirements of the company. For instance, companies are required to publish and audit their financial accounts while management accounting reports are neither audited nor published.
References
Francis, K.A. (2017). The differences between financial accounting and management accounting. Chron. Retrieved from http://smallbusiness.chron.com/differences-between-financial-accounting-management-accounting-3985.html
Surbhi, S. (2014). Difference between financial accounting and management accounting. Key Differences. Retrieved from http://keydifferences.com/difference-between-financial-accounting-and-management-accounting.html
