In a financial accounting course, students learn how to prepare, read and analyze financial statements. There are two primary differences between financial and management accounting. Even though financial accounting is of great importance to current and potential investors, management accounting is necessary for managers to make current and future financial decisions for their business. The second difference is that financial accounting is exact and must adhere to Generally Accepted Accounting Principles GAAP , while management accounting can be based off a guess or estimate since most managers do not have time to get exact numbers by the time a decision needs to be made.
As an undergraduate or graduate business student, you will likely be required to take one course in financial accounting and one course in management accounting before you complete your degree. At Bentley, the general business curriculum for undergraduate students takes a less traditional approach.
Instead of completing two separate courses in financial and management accounting, students are required to take two courses that integrate both fields. Management accounting is an internal function that allocates materials, labor and overhead costs to products. And Management accounting or managerial accounting is concerned with the provisions and use of accounting information to managers within organizations, to provide them with the basis to make informed business decisions that will allow them to be better equipped in their management and control functions.
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Upvote 2 Views Followers 0. Write an Answer Register now or log in to answer. Upvote 2 Downvote 0 Reply 0. Upvote 1 Downvote 0 Reply 0. Upvote 0 Downvote 0 Reply 0. These reports are mandatory for all businesses. Banks, investors and regulators use these reports to approve loans, lines of credits and to make sure you are following GAAP Generally Accepted Accounting Principles.
These reports reflect the financial standing of your business at a specific point in time. You will be able to dive deeper into the financial standing of your company through management reports which consist of:.
Unlike financial reports, management accounting is not mandatory and is for internal use only. Instead of an overall evaluation of the company, management reporting is focused on segments of the business.
By segmenting, you can get into the details and analyze the drivers of your business. An example would be analyzing how the Marketing Department is performing for a certain time period, or how much profit one Sales Employee had a certain month.
Management reports are great for CEOs to gain insight on specific areas of their business. However, you want to make sure you are getting the right reports that your business needs to drive strategic decision-making. They are also not mandatory, unlike statutory accounts, and a business may never require one. However, any accountant will know how important management reports are, especially when making decisions about the future of the company.
Now that you have a basic understanding of statutory and management accounts, it is important to look at the key differences between the two. Knowing the differences between the two types of reporting will help you better utilise them. Thus management accounts are ideal in forecasting and aids in decision making. These are the key differences between management accounts and statutory accounts.
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