What's the difference between Financial Accounting and Management Accounting - Essay Example

Download file to see previous pages... While management accounting is largely implemented for individuals working within the organization, financial accounting generally functions for external entities. In terms of financial accounting there are a number of specific considerations. Although law does not require management accounting, financial accounting is a necessity for organizations. The requirements for corporations to keep financial accounting records is a large consideration, as recent Dodd-Frank regulation has necessitated that expensive accounting measures be kept to ensure that accurate records are established. Within this spectrum of understanding financial accounting is further distinguished, as it requires an external review by a certified public accountant (CPA). It follows that external stakeholders use financial accounting. Generally these external stakeholders implement financial accounting reports as a means of making investment decisions, as the financials of a company are the primary determinant of equity value.
In addition to management accounting being for individuals within the organization and financial accounting being for external stakeholders, there are a number of further differentiating factors between these forms of accounting. While financial accounting necessarily involves the entire organization, oftentimes management accounting is implemented for significant sectors of the business or corporation. This division is such that it creates significant structural divisions between these forms of accounting. While the structure of financial accounting is regulated by the Internal Revenue Service and accounting regulations, managerial accounting is contingent only on the strategic initiatives within the organization. For instance, management accounting records may occur on a daily, weekly, or monthly basis. Additionally, management accounting oftentimes has a strategic angle, as it allows internal officers examine the ...Download file to see next pagesRead More