Difference Between Management Accounting And Financial Accounting
I disagree with the statement stating that management accounting is an unnecessary luxury for business establishment.
The main difference between management accounting and financial accounting is management accounting collect information such as revenue, cash flow and outstanding debts to produce timely trend reports and statistics to inform important, day-to-day management and business decisions whereas financial accounting prepare reports, generally based on past performance; in line with reporting requirements. Another difference between these two types of accounting methods is management accounting combine financial information with non-financial information data to paint a complete picture of the business and they use this to drive business success while financial accounting produce the required financial information for use by other functions within the business, for example department managers.
Management accounting not only brings benefits to the management department but also the employees, and creditors.
1. Advantages to Management
Management accounting helps the management of the company in making suitable decisions such as to make or to buy, replacing manual labor with technology, downsize or maintain operation based on cost reports. Next, management accounting also has good control over materials, machine,
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But, a small concern does not require an elaborate management system. It requires just a simple management system which may not involve heave expenses. Furthermore, the expenses of a simple management system can be minimized if it is run effectively and efficiently. That means, if a simple management system is adopted, and is run effectively and economically, management will be well within the reach of even small concerns. So, the argument that small concerns cannot afford to install any management accounting system is not quite
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