FINANCIAL & MANAGEMENT ACCOUNTING

Financial and Management Accounting: The Contribution to Effective Business and Management

Table of Contents

Introduction3

Discussion4

Management Accounting4

Financial Accounting4

Management Accounting and Financial Accounting in Business Practice4

Examples5

Management Accounting and People/ Power Structure6

Behavioral/ Social/ Managerial Levels of Management Accounting and Financial Accounting7

Differences between Management Accounting and Financial Accounting8

Overlapping of Management and Financial Accounting9

Main Techniques of Management Accounting and Financial Accounting10

Legislation about Financial Accounting10

Techniques of Management Accounting11

Activity Based Costing11

Budgeting12

Cash Flow13

Management Accounting in Different Sectors14

Accounting for Effective Business14

Conclusion17

Financial and Management Accounting: The Contribution to Effective Business and Management

Introduction

The study is related to the financial and management accounting with respect to their contribution to effective business and management. In this context, Management accounts are geared to estimates of future costs and revenues rather than simply reporting past revenues and costs as financial accounts do, thereby 'providing valuable management information for preparing accurate estimates and tenders and for use in negotiating price changes (Strischek, 2001, Pp. 38).

Financial accounting refers to the preparation, collection, presentation, and reporting of its financial statements for the financial activities of the entity related activities. The importance of financial accounting and management accounting in any organization is essential as it is defined on the basis of the financial position of the business and strategic decision made by the company. The financial accounting records economic transactions, its classification and aggregation of transactions, so that the accounting database at any time is able to provide the financial position of the firm.

Discussion

Management Accounting

Management accounting refers to the provision of financial and non-financial information within organizations to help managers and other employees create value through the effective use of resources. It is concerned with providing information for planning and control, to manage the reduction of waste, and to monitor and manage organizational strategies. This can be compared with financial accounting, which is concerned with the provision of information for interested parties external to the organization, including investors and potential investors and government authorities. Prior to the 1990s, management accounting was defined more narrowly.

Management accounts are geared to estimates of future costs and revenues rather than simply reporting past revenues and costs as financial accounts do, thereby 'providing valuable management information for preparing accurate estimates and tenders and for use in negotiating price changes (Richard, 2007, Pp. 34).

Financial Accounting

Financial Accounting represents collection, presentation and preparation of the report and its submission of its financial statements for the financial activities of the entity's activities.These statements include a balance sheet, income statement, statement of cash flows, statement of equity, in accordance with generally accepted accounting principles.

Management Accounting and Financial Accounting in Business Practice

Modern multinational enterprises may have hundreds of profit centres in which managers have operational discretion and are evaluated on the basis of their financial results. Not only are financial accounts produced for these centres, but measures such as return on investment are used for the purpose of allocating capital between them. These large enterprises may have thousands of cost centres which are established where output and related inputs can be ...