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Management accounting is branch of accounting that seeks to analyze and supply cost based information to the organizations’ management to aid in decision making, planning and control of operations. It generally involves developing specific accounting information to organizations’ managers. On the other hand, financial accounting deals with daily financial operations of an organization and indicates the current financial status of the business. Financial statements generated from financial accounting are usually inferred by managerial accountants to generate management accounting reports (Weygandt, Kieso & Kimmel, 2010, p. 5).
By looking closely to the two accounting types there notable differences between managerial and financial accounting. While financial accounting generates information which is relied upon by organizations’ outsiders such as shareholders and creditors, managerial accounting generates information which is utilized by managers. This information assists managers to make informed decisions. Managerial accounting and financial accounting differs based on their objectives. Financial accounting aims at disclosing the financial position of the business after a certain specific period. Management accounting on the other hand aims at providing financial information to organization managers to aid them in decision making, goal setting and planning. Additionally, management accounting reports are not prepared for specific periods as it is the case for financial accounting. Preparation of financial accounting reports is a statutory requirement. The law requires organization to prepare such account to reflect the financial status of the organization to the public. Conversely, preparation of managerial accounting reports is not mandatory (Weygandt, Kieso & Kimmel, 2010, p. 9).
Managerial accounting reports utilizes its information in present and forecasting for the future while financial accounting presents historical information of the company’s past period financial information. The format and layout of managerial accounting is different from that of financial accounting. Managerial accounting reports does not follow specific outline to present financial information as it is the case with financial accounting. Additionally, management accounting reports does not adhere to stipulated such as GAAP and IFRS since they are informal and are for internal use only. Financial accounting however has to comply with international accounting standards since they are for external use and have to be identical for convenient comparison. Mangers use managerial accounting reports when the need arises hence generation of these reports is irregular. Statements of financial accounting are however…”