Financial accounting is a branch of accounting that involves in aspects of reporting of financial transactions carried out in a business, make summary, and analyzing the reports of finance to the business. Notably, financial accounting broadly entails making of financial statements putting out the general consumption of the public, stakeholders, banks, business owners, suppliers and other financial agencies for decision making. The main aim of preparing financial statements is to help in decision making. Also, to trace the bossiness financial position and trace the trend of the most recent transactions. Keeping of financial records also help to compare the trend from time to time. Financial accounting helps stakeholders to make viable decisions on whether to invest in the bossiness or to withdraw their investment. On the other hand, managerial accounting is another branch of accounting that involves provision of financial and non-financial decision making information to the management. According to Institute of Management Accounting (IMA), management accounting is an occupation that entails connecting in administration decision making performance, management systems and decisive planning (Warren, & Jones, 2018). Management accounting does not only look at the financial side of the business but puts into consideration the events that happen around the business and evaluate the needs of the business. Notably, while both are accounting branches present in the same organization, they have many differences as they have similarity.
To begin with, both of them are accounting branches. Therefore, the basic work of accounting will be in both. Notably, both financial and management accounting provide information to users. The users of information differ. However, their main aim is to provide financial information to the required users. The other major similarity is that both accounting processes generate reports. Management accounting and financial accounting give accounts information in a report form for the intended users. However, the format used in both tend to differ. Financial accounting standards board gives outline on the best format to see in each. They also give guidelines on how the data should be presented for easy comparison. They also give guidelines on records that the company's financial accountant should produce and those that the management accountants should prepare. Formats for management accounting are however less regulated compared to formats for financial accounting. In addition, they deal with similar items only that the way to do it is differentiated. Financial accounting will deal with items such as revenues, assets liabilities and expenses while the management accounting will deal with the same but reflect from a different angle. Management accounting will deal with corporate personnel attempts to reflect on manufacturing effectiveness using the information that financial accountant analyzed (Warren, & Jones, 2018). The last similarity is that either can do what the other does because they have the same education. Both the financial and the management accountant pursed the same or related course in college and therefore they have knowledge of both accounts.
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In essence, the two have many similarities but on the other side still carry some differences. To begin with, managerial accounting reports are used by the management only to focus on effectiveness of the management to see the set goal of the organization. In the contrary, financial accounting prepares records to be used by people outside the management showing all the financial details for a certain duration. The stakeholders, the investors, and the public are the main users of financial accounting. In addition, there is great difference in preparation of report from both sides. The report prepared by the financial accounting department entail all the details involving the company's finance and are intended to be presented to the public. On the other side, the report prepared by the management is intended to be used by the management and therefore the management will prepare their report in the best way they can understand within the management. Remarkably, the management accounting is not restricted by formats unlike financial accounting which is restricted by formats guided internationally. Also in financial accounting, the general accepted accounting principles must be obeyed while on the other hand no principles are required (Drury, 2007). Notably, there is also fixed time when the organization is supposed to prepare financial accounts while for the management accounting is prepared whenever it is required. In addition, financial accounting deals with events which have already occurred in an organization while management accounting mostly concentrates on the future events intended to happen.
Considering how financial accounting help stakeholder to make the decision, we have news that Fossil Group, Inc. reported their fiscal year and last quarter 2017 financial results on 13th Feb. 2018 listing all their financial reports to the public. For instance, the company reported net income (loss) of $79.9 million which was way higher than the fiscal year 2016 which they had reported $49.9 gross income. The company provides detailed financial report that will help investors to know the position of the company and decide on investing or withdrawing from the company (Fossil Group, 2018). In this case, the trend for Fossil Groups seems positive and hence external stakeholders should consider investing more. The earnings per share raised significantly in 2017 which is a good sow to the stakeholders.
References
Drury, C. (2007). Differences between management accounting and financial accounting, Management and Cost Accounting,
Fossil Group, (2018). Fossil Group, Inc. Reports Fourth Quarter and Fiscal Year 2017 Results. Retrieved from https://globenewswire.com/news-release/2018/02/13/1340213/0/en/Fossil-Group-Inc-Reports-Fourth-Quarter-and-Fiscal-Year-2017-Results.html
Warren, C. S., & Jones, J. (2018). Corporate financial accounting. Cengage Learning.
