Difference Between Financial Accounting and Management Accounting

1.Purpose or Objective of Financial accounting is to show the way the company accounts for revenue, expenses, assets and liabilities of an organization. This variety of information about company financial position and operating results  is used for internal use by management and external by investors, government, shareholders etc, etc. to make decisions.

Management accounting is concerned with providing information to management useful to help make decision for long range planning and controlling business operations.It gives managers information required on daily basis. The information is designed to help managers make managerial decision on daily basis or external use.

2.Primary users of financial accounting results are outside parties outside the organization. These external users are investors, government agencies, income tax authority etc, etc. it can be used internally by organizational managers.

In managerial accounting it is primary users are the organizational managers at various level.

3.Freedom of Choice in managerial accounting is there since there are no constraints  other than cost in relation to benefit of improved managerial decision.

Financial accounting has no freedom of choice since it is constrained by GAAPs.

4. Behavioral implication in managerial accounting is concerned about how measurement and reports will influence the organization manager daily behavior.

In financial accounting behavioral impact is secondary i.e it concerns the measure of performance of business by communicating and measuring economic phenomenon.

5. Time focus for managerial accounting has future orientation since it uses formal budgets as well as historical records.

Financial accounting time focus deals with past. Past orientations.

6. Time span in managerial accounting varies considerably since it can vary from 1 hour to 15 years, thus it provides information on hourly basis.

Financial accounting time span is less flexible, usually over a year or one quarter.

7. Reports in managerial accounting produces very detailed reports. Concerned about details of entity, products, department, territories etc. etc

Financial accounting gives very summarized reports.

8. Delineation of activities in managerial accounting has the field less sharply defined. It has heavy use of other discipline i.e economics, decision sciences and behavioral sciences.

In financial accounting the field is more defined and rarely uses other displines.