financial accounting and managerial accounting

Difference Between Financial Accounting and Managerial Accounting

27/09/2021Accountants , Accounting , Business

Accounting data is collected in financial accounting to generate financial statements. Managerial accounting, on the other hand, is an internal accounting method that is utilised to account for all company transactions. This is the key distinction between financial accounting and managerial accounting. This blog will let you know about the differences between these two types of business accounting.


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Financial accounting and Managerial Accounting


What is Financial Accounting?

Financial accounting is an accounting term that refers to the summarization, recording, and reporting of the financial information of a company. Financial accountants keep track of a company’s internal and external expenditures. They’re also in charge of preparing and submitting financial statements.

They give precise data to the company management, as well as persons from outside the company, such as investors, tax officials, shareholders, and business regulators. This information may be trusted because it is accurate in every way.

The primary focus of financial accounting is to provide financial information to the external users. So, financial statements are necessary to be prepared, and financial information should be presented according to the accounting rules.


What is Managerial Accounting?

This type of business accounting is mainly prepared for internal users, such as the company’s management or directors. Its major function is to prepare accounts that assist managers and directors in controlling the company’s activities and making decisions.

Managerial accounts are not mandatory, so, they can be prepared and presented in any format that is acceptable for the entire management team. Furthermore, management accounts are prepared only when they are required.


Differences Between Financial Accounting and Managerial Accounting

The differences between financial accounting and managerial accounting are shown in the following categories.

1) Nature

Managerial accounting is used to provide forecasts for the future. Financial accounting, on the other hand, is historically oriented because it must look back in order to assess the previously obtained financial results.

2) Systems

Financial accounting is only concerned with maximising profits. It does not care about the company’s entire operating system. Managerial accounting, in contrast, searches for bottleneck activities and looks into alternative strategies to increase profitability by minimising bottleneck issues.

3) Timing

Financial statements can be submitted until the end of each accounting period. Managerial reports, in comparison, maybe delivered more regularly to provide timely information to directors or management so that they can make decisions.

4) Reporting Focus

Financial accounting’s purpose is to produce financial statements that may be shared with internal and external stakeholders, as well as the general public. While managerial accounting is concerned with operational reports that can be shared with internal users.



We hope now you will be able to better comprehend the differences between financial accounting and managerial accounting. So, to summarise our blog, we can say that financial accounting provides a company’s current financial status as well as historical data to a wide range of users. Managerial accounting, in contrast, provides forecasts for the future. It focuses on providing confidential information in order to make decisions that will affect future operations.


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Disclaimer: This blog contains general information about financial accounting and managerial accounting.


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