Difference Between Financial Accounting and Management Accounting

We might have heard both the terms in accounting scenarios like financial accounting, and management accounting. Although, both are the branches of accounting it may differ based on it’s definition and scope. Most of them are confused in these terms and the differences between it. Before entering in detail you must find what is accounting, and why do you need to keep your accounting books?. In general, accounting refers to the process of maintaining records of all financial transactions that have taken place within a business.

Accounting services are one of the important components that demands expert support and guidance. VBV & Associates is the best Accounting Firm in Kochi, Kerala offers all the financial solutions to your business.

Financial recording is the systematic recording of financial data to evaluate the overall performance of a company at the end of period. When it comes to management accounting, key decision-makers can make informed decisions about how to run the company by using current financial and non-financial data provided by management accounting. Managers can carry out all corporate functions, such as organizing, planning, directing, and controlling, by using this information.

Basic Functions and differences of Financial Accounting & Management Accounting

Transaction Records & Forecasting Cash Flow: Large companies are making huge transactions each and every day, and remembering all these is not at all an easy task. In that case financial accounting keeps a record of transaction history like a book, or journal to make up to date. In management accounting the main function is to predict the cash-flow of a company in the future. The management can make independent judgments that are in the best interests of the company and can set up various policies or corrective actions that will help the management improve the cash flow of the company.

Transaction Analysis: In financial accounting, the team responsible for creating various financial statements and books of accounts should analyze the transactions as they take place, summarize them, and verify their accuracy. If it is genuine, the transaction will be recorded to analyze the company’s profit or loss, create a trial balance, and then compile it into a balance sheet. Through the data obtained in the form of information, management accounting assists in determining how much they will receive in return for their investments. Through the use of management accounting, it assists in analyzing the return on their investments in terms of money, reputation, growth, and market share.

Nature of statements: In financial accounting general purpose financial statements should be prepared to show a true and general view of a company. In management accounting, special purpose financial statements to make specific decisions.

The above mentioned are some of the differences of financial and management accounting. Although there are many distinctions between financial and management accounting, several crucial ones that distinguish them from one another must be underlined. Which are:

> Management accounting is more specialized than financial accounting. The scope of management accounting is larger and more  pervasive.

> The goal of financial accounting is to present a true and fair picture of a corporation to its external stakeholders. In order to protect the interests of the company’s current shareholders, management accounting seeks to ensure that the management makes wise choices.

> While management accounting measures and takes into account both quantitative and qualitative factors, financial accounting only measures and discusses quantitative data.

These are some of the key differences between financial and management accounting. In VBV & Associates, We offers effective Accounting Services in Kochi,  which includes all accounting solutions to your business firm such as Management consultancy, Corporate Advisory Services, Tax Consultancy Services, Audit Services, Virtual CFO Services, Business valuation services, GST Consultation, Income Tax Consultation, Accounts outsourcing and whatnot.

For more information, please contact us at vbvassoc@gmail.com or call +91 980 901 2123.