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Describe what financial accounting and management accounting are and what the main differences are.

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Introduction

MANAGEMENT ACCOUNTING MF328A ROBERT LOCHHEAD 0304949 In this report I am going to describe what financial accounting and management accounting are and what the main differences are. I am also going to explain how that management can use the information that is provided can be used in any decision making process and can increase the efficiency and performance of the company. To start with I will give a brief description of both financial accounting and management accounting then show you the main differences. In financial accounting all of the transaction of the company are external which means that they are out with the company like customers, suppliers and shareholders. With regards to cost it only deals with the details of the expenses that the company has incurred. The profit that is shown in these accounts shows the profit of the whole business. People from outside the business only use the accounts of the business and these are normally put out every year or sometimes every six months. The accounts must be put out as it is a legal requirement for businesses. Financial accounts are to do with the costs that have already happened. Financial accounts are the area that includes the classification and also the recording of actual transactions with regards to money. ...read more.

Middle

These requirements are vital to keep the uniformity and help keep the consistency that must be there for any external financial statements. Outsiders need to know that these statements are prepared in relation to certain standards. Management accounts are not required to stick to any requirements when they giving any information that is required for internal sources. There main priority is to give management the information that they need to help them make decisions and also their planning and control function. 4. Time dimensions - Financial accounts report what has happened in the past year or so within the business. Management accounts is concerned with future events and so the management need to gather any details of the costs they expect in the future. 5. Report frequency - in financial accounting there a comprehensive set of accounts that are shown annually and a bit less detailed accounts shown every six months. Management need the information a lot more quickly if it is to do something about it. So therefore management accounting has reports on various activities, these may be printed monthly, weekly or even daily. I am about to discuss the difficulty that most managers have with regards to the lack of information and how managers in making decisions, which could help increase the efficiency and performance of the business, use that information that is provided. ...read more.

Conclusion

Management must look at different things that are outside the decision maker's control, this could happen for each different course of action. Strategic decisions have an important effect on the future of the company and so it is vital that adequate information is found for the firm's ability and the market in which it operates. 4. The alternative course of action should be decided on a comparison of the cash flows. Each of the alternatives should have sufficient analysis of the benefits should be applied. 5. The budgeting process is one way that the company could choose, this is a financial way for bringing into practice different decisions. 6. & 7. In this stage you compare actual and planned output and respond if there is any change from the plan. Managers measure, report on and correct the performance of the company if needed in order to achieve the company's goals. To keep an eye on the performance the accountants give performance reports and give them to manager it involves, who then make the appropriate decisions. These reports give a comparison of actual and planned outcomes are given out at regular intervals. To have good control of the business they need the right course of action to be taken so actual output goes along with the planned output, also the plan may need to be changed if the plan is no longer a reasonable target. ...read more.

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