Managerial accounting is a branch of financial accounting and serves

essentially the same purposes as financial accounting.

Managerial accounting and financial accounting are two of the most prominent branches of
accounting. They both deal with processing information which is useful in decision-making;
however, they have notable differences that distinguish them from each other. Financial
Accounting involves the preparation of general-purpose financial statements used by various
users in making informed decisions. The main objectives of financial accounting are to disclose
the end results of the business, and the financial condition of the business on a particular date. It
is geared towards external users of accounting information. External users are, investors,
creditors, debtors, lenders and the government. Such reporting is usually accomplished through
the preparation and presentation of financial statements. In order to facilitate comparison,
financial accounts are prepared using accepted accounting conventions and standards.
International Accounting Standards (IAS) help to reduce the differences in the way companies
draw up their financial statements. The financial statements are public documents, and therefore
they will not reveal details about product profitability. Management need much more detailed
and up-to-date information in order to control the business and plan for the future. Presenting
specified financial information in prescribed formats and under specified guidelines to
stakeholders is a mandatory requirement of the law. The financial information that financial
accounting captures is usually presented as financial statements to an entitys internal and
external stakeholders. These financial statements include, the balance sheet, which reports the
entitys financial condition at a specific point in time, the Income Statement, which reports its
operating results over a span of time, a statement of cash flows, which reports its cash inflows
and outflows for a variety of activities over a span of time, statement of equity, and explanatory
notes to those financial statements that provide the reader with insight into the reported amounts.
Financial accounting processes historical information and summarizes them in the preparation of
financial statements. Emphasis of financial accounting are reliability, verifiability, objectivity of
financial information. Financial accounting is required by law. Companies are mandated to
furnish financial statements periodically. Financial statements provide general information,
addressing the common needs of its users and present data in an summarized and concise way.
Sources within the company, example the accounting records of the company. Financial
statements are usually furnished monthly, quarterly, annually.

Management accounting processes economic information to be used by management in

making decisions. It is geared towards internal users of accounting information. Internal users
are, as discussed above, management and employees. Such reporting is accomplished through
custom designed reports. Management accounts provide information to enable costing products
and production methods, assessing profitability and so on. In order to facilitate this, management
accounts present information in any way which may be useful to management, for example by
operating unit or by product line. Management accounting is an integral part of management
activity concerned with identifying, presenting and interpreting information used for, formulation
of strategy, planning and controlling activities, decision making, and optimizing the use of
resources. Management accounting deals with current problems of the company. Also,
management accounting involves the preparation of budgets and forecasts. Emphasis of
managerial accounting are Relevance and timeliness, to provide the maximum aid in
management decisions. Management accounting is not mandatory. However, a company that
does not use it will suffer great consequences. The financial reports in managerial accounting
address a specific issue or concern. Financial reports carefully detail all information that the
management should consider in making specific decisions. Any source, both internal and
external such as interest rates, political environment, economic and industry concerns, etc.
Financial reports in management accounting are prepared as the need arises. Managerial
accountants perform a wider gamut of analyses than do financial accountants, including
analyzing the profit contributed by different products or business segments of an entity, the effect
on profits of changing the entitys cost structure, because managerial accounting reports are
generally unique to a given entity, there are no standard reporting formats or accounting or
reporting principles that guide them. Furthermore, they are generally not audited by an
independent entity because outside stakeholders do not rely upon them; however, the entitys
internal auditors may review the reports as part of their responsibilities.
 In conclusion, there have been arguments as to which between financial accounting
and managerial accounting is more important. However, it is somewhat pointless to argue on
which is more important. Each has its own purpose in the business environment. Financial
accounting is concerned with the principles, practices and systems employed to compile
transactions of an entity and present financial information for use by an entitys internal and
external stakeholders. Managerial accounting on the other hand is done to help its managers
make business decisions that affect the entitys future profits and cash flows. Understanding both
financial accounting and managerial accounting is crucial to have a well-developed
understanding of business for a management executive. The average business school student will
be exposed to both financial accounting and managerial accounting concepts during their
program, including those involving budgeting and long-term financial planning. The average
student majoring in Accounting will complete courses not only in financial accounting and
managerial accounting but also other topics such tax accounting, auditing, international taxation,
MIS, etc.
 REFERENCES

http://www.graduatetutor.com/accounting-tutors/difference-between-financial-accounting-
managerial-accounting/

http://www.accountingtechniciansireland.ie/Files/Documents_and_Forms/Financial_Accounting
_Sample_Chapter

http://www.accountingverse.com/managerial-accounting/introduction/managerial-vs-financial-
accounting.html

https://www.scribd.com/doc/246719600/Introduction-to-MAS