Comment Briefly on the Major Differences Between Financial and Management Accounting

Comment briefly on the major differences between Financial and Management Accounting:

Contrary to the conventional belief that Cost/Management accounting is an extension of the market oriented double-entry book keeping system, Johnson (1983) said it was the result of the endeavor to surmount market imperfections to assist firms internally. It is "the recording (monetary/non-monetary), summary and analysis of financial and-non financial data for benefit of managers of an organisation" usually to plan, direct, motivate, control and evaluate performance. Financial accounting is "the recording (double-entry book keeping), summary and analysis (ratio/performance) of monetary transactions of an entity for benefit of users." (Lecture notes) The users are external bodies like investors, banks, labour union, stock exchange, creditors, financial analysts etc.

 Managerial accounting is displayed in a continuous, confidential and detailed report showing purchases, fixed assets, sales forecasts, budgetary analysis, comparative or feasibility studies, mergers and consolidations etc. Financial accounting gives a set periodic summary of financial position like balance sheet, profit and loss, cash flow statements etc concerning liquidity, profitability, solvency, stability etc.

 Financial accounting provides precise historical facts about the overall performance of the firm. Management accounting uses these past records to frequently envisage the future of individual departments like products, customers, employees, competitors etc and take necessary decisions in the present.

 Financial accounting should follow Generally Accepted Accounting Principles and needs audit by independent CPA firms like Securities and Exchange Commission, Financial Accounting Standards Board, Public Company Accounting Oversight Board etc. It is mandatory for Public limited companies to publish their financial statements