A comparison between the financial accounting and management accounting may have differences in its respective field. The basic differential points are as follows:
- In financial accounting, financial statements are mainly meant for outsiders such as shareholders, debenture holders, creditors, and government agency. On the other hand, in management accounting necessary statements are prepared mainly for the management for internal decision making purpose.
- In financial accounting, statements are presented on the basis of standard, well-defined and accepted forms. And in management accounting, the management follows its own rules for achieving its own set of objectives.
- Financial accounting usually covers the entire organization whereas management accounting covers a part of the organization at a time.
- Financial accounting maintains statutory rules and regulation, while management accounting is optional and it is based on internal objectives of the organization.
- Financial accounting is historical in approach. And management accounting essentially projects the future cash flows. In other words, data generated by the financial accounting system indicate what has happened in the past. These data will be helpful only to the extent that they represent future events.
- Financial accounting relies on accounting statements for example, balance sheet and income statement. Whereas management accounting may rely on any accounting information which may be relevant for formulating plans, making decisions and controlling operations.
- In financial accounting, generally annual financial reports are required to be prepared. But in management accounting the frequency of reports ranges from hourly to daily, weekly, fortnightly, monthly, quarterly, half-yearly, and to medium-term and long-term span of time depending upon the requirements of the management.