Compare the difference between management accounting and financial accounti

Due to the difference in the object and the purpose of information use, there are fundamental differences between the management accounting and the financial accounting.

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Management accounting is a system that collects, processes and communicates information for corporate internal managers to help make business decisions that are relevant to the future of the organization and underpinning management. corporate governance systematically, towards sustainable business development.

Financial accounting means recording, reflecting, synthesizing data, preparing financial statements to serve the needs of providing information to objects outside the unit or enterprise. Objects include shareholders, functional agencies such as taxes, inspectors ..., creditors, banks ... mainly serving the needs of macro management.

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Due to the difference in information object and purpose, there are basic differences between management accounting and financial accounting as follows:

1. About objects using information

Objects of using information of management accounting are members inside the enterprise: owners, directors, managers, supervisors, ... Meanwhile, accounting information Finance is mainly provided to external entities such as shareholders, lenders, customers, suppliers and governments (tax authorities, financial regulators ...).

2. About the information characteristics

Financial accounting information must comply with applicable accounting principles, standards and regimes of each country, including international accounting principles and standards recognized by other countries. On the contrary, for management accounting, due to the need to be sensitive and quickly grasp diversified business opportunities, management accounting information needs to be flexible, fast and depends on each specific decision of The manager is not forced to comply with the general accounting principles and standards. State regulations on management accounting (if any) are only for guidance.

3. Regarding the legality of the accounting

Financial accounting is ordinance, which means that the system of books, records, presentations and information of financial accounting must all comply with uniform regulations if desired. On the contrary, the organization of governance is internal, under the jurisdiction of each enterprise in accordance with management characteristics, management requirements, conditions and specific management capabilities of each enterprise.

4. About the characteristics of the information

Information of financial accounting is mainly expressed in the form of value. Management accounting information is also expressed in physical form and value form.

Information of financial accounting is information reflecting on economic operations that have occurred or happened. Meanwhile, management accounting information mainly focuses on the future because most of the responsibility of the administrator is to choose the plan, project for an event or a process that has not happened yet.

Financial accounting information is mainly pure accounting information collected from accounting documents. In management accounting, information is collected to serve the decision-making function of a manager and is often not available, so in addition to relying on the original recording system of accounting, management accounting also Must apply many other methods such as statistics, professional accounting, economics, management to synthesize, analyze and process information into a usable form suitable for the original purpose.

5. About the reporting form

Reports used in financial accounting are general accounting reports of the whole enterprise (called financial statements) that generally reflect the capital, assets, and operating results of the business in one. Period (including Balance Sheet; Report on business results; Cash flow statement; Notes to financial statements).

The management accountant's report goes into detail in each department, each stage of the business (such as reporting production costs and costs, reports of liabilities, reports of imports and exports and inventory of inventory. ...).

6. About the reporting period

The reporting period of a management accountant is more frequent and shorter than the reporting period of financial accounting, depending on corporate governance requirements. Financial accounting reports are prepared periodically, usually annually.

With the above 6 differentiating criteria, it is certain that the related objects will easily compare and distinguish the difference between management accounting and financial accounting, helping enterprises to operate their business effectively, avoiding unnecessary mistakes.