What is the difference between Financial Accounting and Management Accounting?

What is the difference between Financial Accounting and Management Accounting?

Answer

Financial accounting deals with the financial statements which are given to stockholders, lenders, financial analysts, and others outside of the company. Courses in financial accounting cover the usual accounting principles which must be followed when reporting the results of an organisation’s past transactions on its balance sheet, income statement, statement of cash flows, and statement of changes in stockholders’ equity.

Managerial accounting deals with providing information inside the company so that its management can operate the company more effectively. Managerial accounting and cost accounting also provide instructions on working out the cost of products at a manufacturing enterprise. These costs will then be used in the external financial statements. In addition to cost systems for manufacturers, courses in managerial accounting will include topics such as cost behavioUr, break-even point, profit planning, operational budgeting, capital budgeting, relevant costs for decision making, activity based costing, and standard costing.