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Managerial Accounting Vs Financial Accounting Management Accounting is used primarily by those WITHIN a company or organization. Reports can be generated for any period of time such as daily, weekly or monthly. Reports are considered to be “future looking” and have forecasting value to those within the company. Financial accounting is used primarily by those OUTSIDE of a company or organization. Financial reports are usually created for a set period of time, such as a fiscal year or period. Financial reports are historically factual and have predictive value to those who wish to make financial decisions or investments in a company. . Confidentiality and Type of Information. Management Accounting is the branch of Accounting that deals primarily with confidential financial reports for the exclusive use of top management within an organization. These reports are prepared utilizing scientific and statistical methods to arrive at certain monetary values which are then used for decision making. Such reports may include: 1. Sales Forecasting reports; 2. Budget analysis and comparative analysis; 3. Feasibility studies; 4. Merger and consolidation reports
Financial Accounting, on the other hand, concentrates on the production of financial reports, including the basic reporting requirements of profitability, liquidity, solvency and stability. Reports of these natures can be accessed by internal and external users. 2. Regulation and Standardization While Financial Accountants follow GAAP (generally accepted accounting principles) set by professional bodies in each country, Managerial Accountants make use of procedures and processes that are not regulated by standard-setting bodies.
However, multinational companies prefer to employ Managerial Accountants who have passed the CMA certification. The CMA (Certified Management Accountant) is an examination given by the Institute of Management Accountant, a professional organization of accounting professionals. This certification is different and distinct from the CPA or Chartered Accountant certificate. 3. Time Period Managerial Accounting provides top management with reports that are future-oriented, while Financial Accounting provides reports based on historical information.
However, Management accountants based their reports on historical values, while employing statistical methods to arrive at future values. Managerial Accounting Reports to those inside the organization for planning, directing and motivating, controlling and performance evaluation. Emphasis is on decisions affecting the future. Relevance of items relating to decision making is emphasized. Timeliness of information is required. Detailed segment reports about departments, products, customers, and employees are prepared. Need not follow generally accepted accounting principles (GAAP). Not mandatory.