Financial vs. Managerial Accounting
Although financial accounting and managerial accounting are closely related and work side by side but they are different on following aspects:
- Users: Users of financial accounting information are people outside the organization such as stockholders, government, investors, etc. The users of managerial accounting information are people inside the organization for example managers and entrepreneurs.
- Time: Financial accounting is mainly concerned with past business activities. Financial accounting is used to record the actual facts and figures of financial transactions. Although managerial accounting does involve the analysis of past business activities to evaluate departmental performance, it is also concerned with future planning and budgeting.
- Regulation: Financial accounting practices are governed by GAAP and IFRS etc. Since financial accountants have to report about the financial performance of the business to external users therefore it is very necessary to enforce such regulations to provide correct information to people outside the organization. Managerial accounting is not governed by such rules and regulations.
- Requirement by Law: Registered companies are required by law to produce and publish financial accounting information. But managerial accounting is not mandatory by law. It is only required internally.
Written by Irfanullah Jan