Know the Difference between Financial and Management Accounting – In the world there must be such a thing as a financial process that is very much needed and important by most people. The main role of accounting science is to assist management tasks, especially in the monitoring and planning functions. In general, accounting deals with financial matters to the activity of recording money. However, in its application in the business world there are various types of accounting. Each has a different role and function. Some of the most common types of accounting known by the public are financial accounting and management accounting.
The following is a more complete difference between financial accounting and management.
1. Different types and submissions of reports
Typically, financial statements consist of a statement of financial position, income statement, statement of equity, statement of cash flows, and notes to financial statements. Then, this report is prepared at the end of each period, usually at the end of each semester or the end of the financial year.
On the other hand, in management accounting, the reports produced and their submission are determined by management policies. So, reports are generated whenever needed.
2. The purpose of the report is different
Financial accounting is intended to provide an overview of the company and its operations in a period. So, the company’s parties who have an interest are expected to understand the report prepared by the company.
Meanwhile, reporting in management accounting is intended for certain departments to meet certain objectives for the users of the report.
Also Read :Types of Cost Accounting
3. The contents of the report are different
Standard content of financial accounting reports usually describes the state of the company as a whole as a whole. If the company has a subsidiary, the report is still a consolidated report.
Whereas in management accounting, the contents of the report describe the condition of a section or department within the company. The information included in management accounting is determined by management.
4. Different reporting methods
Reporting in financial accounting must comply with financial accounting standards applicable in Indonesia, this refers to the Statement of Financial Accounting Standards (PSAK).
PSAK is a concept, standard, and procedure that must be followed by business entities in preparing financial reports, which are specifically addressed to external parties of the company.
It is different in management accounting, the way of reporting is determined directly by the company’s management so that from one company to another the reporting method is different.