123 School Work

Differences in Management and Financial Accounting

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  There are many differences between management and financial accounting,. The name gives us the clue form which we can work outwards from. Managerial accounting is the accounting system that is used by the management of the company, whereas financial accounting is that which is used by those who may be interested in the financials of the company, stakeholders such as the shareholders, financial institutions and other investors. If we look at the way in which the accounts are used we can see the differences. Financial accounting can be typified by the annual accounts and the way in which they are used to compare year with year and also in terms of benchmarking between companies for performance. Therefore, we can see that the majority of people using these accounts are not directly involved with the day to day running of the company and as such can understand that the figures are all historical, and may be out of date by the time they are read. Management accounting is different, the financial accounts include many theoretical costs rather than real costs as seen in the bank accounts, for example depreciation is not an invoiced charge it is a financial accounting tool (Chadwick, 1998). Management need more that this, they need to have up to date figures on a daily or weekly basis form which they can monitor the companies performance, control costs and the bank accounts, plan for the future as well as formulate goals, and focus on the specific issues that require attention. It is also useful to understand that management accounting also allows a greater amount of planing giving costs for different scenarios so it may also be used as a planning tool (Chadwick, 1998). In short the tool of management account can be seen as the preparation of accounts that serve the purpose of the management of the company...