What is management accounting information different from financial accounting information??
Financial and Managerial Accounting
Professional accountants look at the accounting records and reports of a business from two perspectives. The terms they use to describe these two perspectives are:
• Financial accounting
• Managerial accounting
Financial accountancy (or financial accounting) is the field of accountancy concerned with the preparation of financial statements for decision makers, such as stockholders, suppliers, banks, employees, government agencies, owners, and other stakeholders.
The fundamental need for financial accounting is to reduce principal-agent problem by measuring and monitoring agents' performance and reporting the results to interested users. Financial accountancy is used to prepare accounting information for people outside the organization or not involved in the day to day running of the company.
Management (or managerial) accounting, on the other hand, is concerned with the provisions and use of accounting information to managers within organizations, to provide them with the basis to make informed business decisions that will allow them to be better equipped in their management and control functions.
In contrast to financial accountancy information, management accounting information is:
• usually confidential and used by management, instead of publicly reported
• forward-looking, instead of historical
• pragmatically computed using extensive management information systems and internal controls, instead of complying with accounting standards
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