Financial and Management Accounting

Table of Content

Introduction2

Discussion3

Financial Accounting3

Management Accounting3

Differences4

Financial Accounting4

Management Accounting6

Organizations8

Requirements8

Regulations and Standardizations8

Time period9

Number of Reports9

Types of Reports9

Financial Performance10

Purpose of Information10

Conclusions11

Financial accounting is preferred over Management Accounting11

References12

Bibliography14

Financial and Management Accounting

Introduction

Accounting is one of the main aspects in every organization. In each organization, it is necessary to give financial and non-financial information in order to make the best decisions and make the organization financially establish. Every organization needs accounting in order to promote and get success in the market. In short, accounting is the backbone of every organization. We find two types of accounting: financial accounting and management accounting. We will discuss the differences between these two accountings and in the end; we find which accounting is mostly used by organizations.

Discussion

Financial Accounting

Financial accounting mainly deals with the financial health of an organization to all its stakeholders especially external stakeholders. There are financial accounting reports which are reviewed by stockholders, board of directors, financial institutions and other investors. Every organization tends to give financial reports and the audience notice that how this organization has performed this time. These reports should be completed annually, and these reports should be kept in record for public record.

Management Accounting

Management accounting is also referred to as managerial accounting as it is used by managers. Managers use the management accounting in order to make decisions on daily operations of the business. It mainly depends, on the future planning, not on past performances. Sometimes, it is required to take immediate decisions specially when there are fluctuations in markets.

Differences

Financial Accounting

Financial accounting is mainly used and utilized by the stakeholders outside the organizations or firms. The reports prepared with the help of financial accounting are for a short period of time e.g. a fiscal period. Financial reports are historically important for those who want to make investments or take decisions in a firm. Management accounting also consider the private financial reports and is used by the top of the organization. The reports are made with the help of scientific and statistical approaches, to arrive at certain monetary decisions, which are further used for making decisions. There are many reports which include: sales Forecasting reports, Budget analysis and comparative analysis, feasibility studies, Merger and consolidation reports. Financial accounting, however, produces the financial reports considering many factors such as liquidity, solvency and stability. The natures of these reports are determined by the internal and external stack holders and the creditors. There are many stack holders in the organizations who are interested in the activities of that firm.

Stakeholders are those who are linked with the organization and activities within the organization might affect them. Business Managers always need accounting details in order to make firm decisions. Investors always seek profits and creditors always watch the organization's financial ability to meet its financial goals. Brokers tend to make certain opinion on investment recommendations. Employees also select certain organization in which they enhance their careers by using their skills. It seems many people are interested in the financial information of an organization. There are two types of users in ...