Financial and Managerial Accounting
According to the Illinois State Board of Education financial accounting is "the recording and reporting of activities and events affecting the money of an administrative unit and its program. Specifically, it is concerned (1) with determining what accounting records are to be maintained, how they will be maintained, and the procedures, methods, and forms to be used; (2) with recording, classifying, and summarizing activities or events; (3) with analyzing and interpreting recorded data; and (4) with preparing reports and statements which reflect conditions as of a given date, the results of operations for a specific period, and the evaluation of status and results of operation in terms of established objectives (2005)."
Cal Poly defines management accounting as "the process of identification, measurement, accumulation, analysis, preparation, interpretation, and communication of financial information used by management to plan, evaluate, and control within an organization and to assure appropriate use of and accountability for its resources. Management accounting also comprises the preparation of financial reports for non-management groups such as shareholders, creditors, regulatory agencies, and tax authorities (1994)."
Key differences between the two disciplines are defined in the following chart.
Management Accounting Financial Accounting
A management accounting system produces information that is used within an organization, by managers and employees A financial accounting system produces information that is used by parties external to the organization, such as shareholders, bank and creditors
Management accounting helps management to record, plan and control activities and aid ...