Financial Accounting Vs Management Accounting- this video will explain what are the differences between Financial Accounting and Management Accounting? It the main differences of Financial Accounting (FA) in consideration to Management Accounting (MA)
An issue exists that what are the differences between financial accounting and management accounting exactly what points will be covered under financial accounting or what mandates exist under financial accounting and what mandates or what areas exist under management accounting if you would like to know more about it continue until end of the video in this
Video we will cover the differences between financial accounting and management accounting let’s go and start our work first of all financial accounting is a way of reporting financial performance and financial position of a business it will show from the start of the period up to end of the period what was the performance of the company in nature of the revenue
And expenditure how much he they have generated the revenue and how much they have incurred the expenses but in management accounting is a management information system which analyze data to provide information as a basis for managerial actions what managerial actions decision making planning controlling so the main focus here is to produce some information for
The managerial actions of the management team board of directors here if you would like to know what is the purpose of management information or how to generate the great management information for your management team at above we have a link refer to that video you will understand more the second difference the financial accounting focuses more on external users
Such as government you will produce the financial statements the reports for external users such as shareholders government the government will use this for tax purpose the shareholder will use it to know how much was the earning of the company and how much there is a possibility of dividend or growth in the future but in management accounting the reports are
Not used for external purpose they are mostly produced for internal users such as managers for the decision making and planning you will generate some report about the satisfaction of the customer so the management team will decide how to act in the future to increase the level of satisfaction of the customer but this report will not be shared with the government
For tax purpose or whatsoever other points there is legal mandates on preparing the reports in under financial accounting the government will set rules and laws that each company should produce their balance sheet and statement of performance to express the level of income they have and based on that they do the calculation for the tax and check the accuracy
Of tax they paid or the expenses they have incurred or the revenue they have generated so the acts and laws will mandate the companies to produce their financial reports but there is no legal binding or legal mandate under management accounting that they should produce their reports these are the reports which is generated by the companies at the time which is
Required not hundred percent by any law or act another point under financial accounting the format is determined by a law or accounting standards ias 1 international accounting standard 1 will say how you need to prepare the financial statement they should follow a certain format a predetermined format that each company should follow what element of financial
Statement should convey or which elements should come in which statement suppose revenue and expenditure should come in income statement in statement of performance of the business and capital liability and asset elements should come in balance you statement of financial position of the company of course we will have the videos which explain in detail the
Elements of financial statement and financial statement in its own management accounting and their management accounting format is entirely at management discretion once a while they may need a specific purpose report so the format of that report is in handle the management account and management to prepare the report by what they need exactly so there is no
Predetermined format by a law or accounting standard under management accounting financial accounting focus on business as a whole remember the point in financial accounting we are considering the whole business how did it performed during the period how what is the position of the company as a whole in liquidity what level of cash exists in the business as
A whole now but in management accounting the focus is on specific areas i mentioned the customer satisfaction from our product a the level of cells in this pretori the performance of impo lies under maintenance department these are specific reports and specific areas which is covered under management accounting but financial accounting will focus as a whole
Under financial accounting the focus is on monetary terms like if you if you point out the revenue will be expressed in in dollar in euro in pound so that’s monetary term but under management accounting we have some flexibility there is possibility of having the report of qualitative data and quantitative data it can be expressed in monetary terms and there is
Possibility that you have the data or the report or information which is expressed in qualitative terms and narrations such as about the level of satisfaction of impolites working in north of the country you will be expressed you will express as a percentage or number of employees who wanted the services bad a number of importers who wanted the services good the
Satisfaction they have so both monetary and non-monetary information and reports are possible under management accounting and the last one financial accounting the most focus is what we did last year or previous years so it will deal with historic picture of past information it will say to the shareholders how was the performance of the company and the level of
The profit the level of liquidity the level of non-current assets in the past year or in previous years but management accounting besides dealing with historic data use that historic data for future management actions for future planning for controlling that plan implementation and for decision making decision making may be on investing in a new branch new area
Or whatsoever but they will use the past data plus the current data for future decision making for making the way of the company to the future for more similar videos kindly subscribe our channel press the notification button and share with your friends lots of other videos are underway which will focus on the base points the points which you cannot even find
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Transcribed from video
Financial Accounting Vs Management Accounting By Akbary Education
