Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world. Financial accountants are responsible to prepare accounts for whole of the organization and management is required to get them audited to ensure true and fair view of the operating performance and financial management of the company. While preparing financial accounts the companies are required to abide by the standards, principals, and assumptions stated in the Generally Accepted Accounting Principals (GAAP).
Financial reporting is sought to be in accordance with International Accounting Standards and International Financial Reporting Standards governed by the International Accounting Standards Board to ensure uniformity through out the world for the clear comprehension of the external users. Than again management accounting is not covered under the GAAP and does not necessitate uniform reporting mechanism through the world.
Financial accounting basically covers a time dimension usually six months or twelve months and reports income statement and cash flow for a specific time duration and balance sheet at a specific date. Financial accounting is essentially past oriented in nature whereas management accounting is meant for what went before as well as it is prospective in nature. Financial accounting only states what happened last year whereas management accounting may also state what is going to happen next year. Thus, management accounting could be called ‘internal reporting’ and financial accounting could be called ‘external reporting’. They provide guidelines on the accounting measurements and disclosure requirements.
Secondly, there is a statutory requirement for public limited companies to produce annual financial accounts regardless of whether or not management regards this information as useful. Thirdly, financial accounting reports describe the whole of the business whereas management accounting focuses on small parts of the organization such as the cost and profitability of products, services, customers and activities. In addition, management accounting information measures the economic performance of decentralized operating units, such as parts, segments, divisions or departments. Revenue is defined according to the statutory accounting standards, i.e. the FRS.
In contrast, management accountants are not required to adhere to generally accepted accounting principles when providing managerial information for internal purposes. In addition, a detailed set of financial accounts is published annually and less detailed accounts are published semi-annually. Management requires information quickly if it is to act on it. Consequently, management accounting reports on various activities may be prepared at daily, weekly or monthly intervals.