What are the key differences between financial and management accounting?

Financial accounting is driven by external regulations, be it tax authorities or capital markets regulators. Its aim is to create a common framework to be used by companies to report its balance sheet and statement of earnings. The output of financial accounting is not always fit for purpose in terms of the information needed by company managers to measure the result of its operations and its assets and liabilities. On the other hand, management accounting is normally designed internally by company management in order to address specific data and information needs in terms of financial performance management. A good ERP implementation will ensure that those accounting perspectives run in parallel without systems and data entry duplication.

Enquanto a contabilidade financeira tem como objetivo transmitir informa??es financeiras precisas e dentro de um padr?o contábil aceito para usuários externos, como investidores, credores, reguladores, autoridades fiscais entre outros, a contabilidade gerencial tem como objetivo transmitir informa??es detalhadas e específicas para a gest?o interna, que é quem determina o padr?o, com o intuito de ajudar na tomada de decis?es, planejamento e controle.

Financial accounting focuses on reporting to external stakeholders such as regulators and shareholders and generally follows accounting principles. Management accounting is internally driven to help business make informed decisions on revenue and how to allocate resources.

Y = f(X), so is Management accounting a function of Financial accounting. In this light, in other to attain the financial position and performance of the business that will be made available to the external users of the FS, set of analysis, planning, forecasting and decision making must have been made available on financial information to the internal manager to prompt goal optimization. Certain conceptual and regulatory principles must be conformed to in Financial accounting ; GAAP or IFRS. Management accounting doesnt follow any standard or principle, as it mostly entails goal/profit maximisation and cost crunch.

Financial accounting has a more retrospective approach Management accounting is more prospective Financial accounting focuses on reporting an organization's financial performance to external stakeholders, such as investors and regulators. It follows generally accepted accounting principles (GAAP) or international financial reporting standards (IFRS). Management accounting, on the other hand, is geared towards providing information for internal decision-making. It helps managers plan, control, and make informed business decisions. Management accounting is more flexible and tailored to the specific needs of the organization.

Correct. Financial accounting follows standardized formats, such as Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS), ensuring consistency and comparability across organizations. In contrast, management accounting lacks a universally standardized format, allowing flexibility to tailor reporting to the specific needs and requirements of internal decision-makers within a company.

Financial statements prepared based of financial accounting is generally for annual period but financial statements based on management accounting can be used by management as per their needs like it may be quarterly, semiannually, Trailing twelve months, annually

Format and frequency of financial accounts are usually defined by an external third party whilst management accounts are defined for internal usage only.

Management accounting is focused on internal decision-making, whereas financial accounting is focused on external reporting and accountability. Because of the differences in measuring and valuation methodologies, management accounting offers managers a customised, forward-looking perspective, while financial accounting provides an uniform, historical snapshot. Financial accounting provides valuations to assets and liabilities based on historical cost or fair market value. Verifiable and objective appraisal is prioritised. The relevance and use of assets and liabilities for internal decision-making defines their value in management accounting.

In financial accounting, measurement and valuation adhere to generally accepted accounting principles (GAAP) or international financial reporting standards (IFRS). Assets and liabilities are typically recorded at historical cost, fair value, or a combination of both. The goal is to provide a reliable and standardized representation of an organization's financial position to external stakeholders. In management accounting, measurement and valuation are more flexible and can be customized based on the organization's specific needs and internal decision-making requirements. Management accountants may use various methods to value assets, such as replacement cost or market value, depending on the context of the decision being made.

The majority of companies would try to use common measurement and valuation principle for both in so far as it was possible. This reduces complexity and therefore reduces cost of compliance and improves accuracy. Where this is not possible systems such as SAP over local shadow ledger capabilities whic can greatly simplify managing the differences.

Analysis of financial statements is a must to do an appropiate interpretation of them. The analysis consists on calculating and giving a brief comment about the result of an specific ratio, while the interpretation pretends to give a whole seen of the economic and financial health of a commpany related with its context.

Financial accounting prepared financial statements generally for external users like the users want to see ratio, growth, EPS, etc while management accounting prepared financial statements is for internal purposes like core focus is on cost optimisation, measurement of operations, etc

Think of financial management as overseeing the entire money aspect of a company, like making sure there's enough money for everything and deciding where to invest it. Management accounting, on the other hand, is like looking under the hood to analyze specific costs, budgets, and performance to help managers make smart decisions about the company's finances. So, financial management is about the big picture, while management accounting is about the nitty-gritty details.

Financial Accounting - Where the money comes from, and where it goes, and how much there is. Management Accounting - What the money does. Trying to get to the essence, albeit with a limited perspective.. ;)

Debe tomarse en cuenta para la medición de los informes de contabilidad de gestión también los parámetros de los llamados bienes intangibles. Hoy día de difícil medición objetiva, pero sin embargo la relevancia cada vez es mayor para tener una correcta apreciación del valor de una organización. O a caso el nivel de ventas siempre será constante sin tener en cuenta el efecto publicitario o del área de marketing, enfocado en sus integrantes

In many instances a good management accounting system can be the key to cutting or eliminating losses on unprofitable products/services/customers as well as help driving the profit-generating parts of businesses. For SMEs who might rely solely on annual financial accounts they may be missing out on the critical factors management accounts would bring including cost and profitability analysis, budgeting, KPI measurements, sensitivity analysis and strategic planning based on key data for each business.

Last but not the least, most of the organisations tend to do the management accounting manually in spreadsheets by using financial accounting data as a start point. With the advancement of technology & AI, I believe there should not be manual spreadsheets, rather necessary customisations/developments have to be made to to the ERP/accounting systems to ensure this management accounting data is automated and authentic.

Hay que entender que los tiempos de gestión operativa y la necesidad financiera no corren en el mismo carril, mucho menos a idéntica velocidad. Hay que realizar un mapeo de las necesidades estructurales de cada proyecto, visto en términos económicos. De ahí planificar el no perder, que el negocio genere el aumento de capital. Dicho esto, ahora sí se debe evaluar el cómo llegar a ese camino. En el caso Argentina, hay que tomar en consideración el precio del dinero de terceros en vez de la utilización del propio. Se puede crear un efecto multiplicador, aún reduciendo la inversión propia en 1° instancia