Differences between managerial accounting and financial accounting

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Managerial Accounting Vs Financial Accounting

1. Confidentiality and Type of Information. Management Accounting is the branch of Accounting that deals primarily with confidential financial reports for the exclusive use of top management within an organization. These reports are prepared utilizing scientific and statistical methods to arrive at certain monetary values which are then used for decision making. Such reports may include:

1. Sales Forecasting reports; 2. Budget analysis and comparative analysis; 3. Feasibility studies; 4. Merger and consolidation reports

Financial Accounting, on the other hand, concentrates on the production of financial reports, including the basic reporting requirements of profitability, liquidity, solvency and stability. Reports of these nature can be accessed by internal and external users.

2. Regulation and Standardization While Financial Accountants follows GAAP (generally accepted accounting principles) set by professional bodies in each country, Managerial Accountants make use of procedures and processes that are not regulated by a standard-setting bodies.

However, multinational companies prefer to employ Managerial Accountants who have passed the CMA certification. The CMA (Certified Management Accountant) is an examination given by the Institute of Management Accountant, a professional organization of Accounting professionals. This certification is different and distinct from the CPA or Chartered Accountant certificate.

3. Time Period

Managerial Accounting provides top management with reports that are future-oriented, while Financial Accounting provides reports based on historical information. However, Management accountants based their reports on historical values, while employing statistical methods to arrive at future values.