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In management accounting, a company may or may not practice management accounting as the option to apply management accounting in the company may be based on the company’s capabilities, orientation or practices.Financial accounting can be defined as the process of recording, summarising and reporting financial transactions of a business.
Meanwhile, managerial accounting depends on good estimates which are provided aptly so that decisions and the circumstances in which decisions are made contribute to the efficiency of plans or goals.
The fifth difference concerns the presentation of financial data.
Double entry is classification of items into one of the five categories: assets, liabilities, equity, income or expense.
The objective of this module is to help you understand the application double entry accounting techniques to a range of simple transactions.
By the end of this module, you will be able to prepare ledger accounts as well as a trial balance.
Ledger accounts are a systematic refection of all transactions in a particular account.Financial accounting reports the summary of the entire company’s financial activities (Garrison, Noreen & Brewer 2011, p. Contrastingly, managerial accounting looks into segments of financial information.For example, in management accounting, expenses in the product lines could be analyzed to identify which products may be prioritized and which products need to be removed from the product offers.You will also learn about concepts such as accruals and prepayments.concept of accounting underpins the accounting technique of double entry system.Second, the emphasis of financial accounting is on the financial consequences of past activities while management accounting is oriented towards using the financial data to make decisions for the future (Garrison, Noreen & Brewer 2011, p. Financial accounting is more of a historical account of business activities whereas management accounting aims to project financial events that are yet to come.Third, financial accounting focuses on objectivity and verifiability, while management accounting emphasizes relevance (Garrison, Noreen & Brewer 2011, p. Relevance in management accounting means that the financial information should be applicable to the problem.This is a financial statement that illustrates how changes in the balance sheet and income affect a company’s cash flows.Specifically, the cash flow statement breaks the analysis down to three areas: operating, investing and financing activities.For management accounting, this aspect is not necessary as the users are internal.The final difference is that financial accounting is mandatory while management accounting is compulsory (Garrison, Noreen & Brewer 2011, p. External groups like the Securities and Exchange Commission and the tax authorities oblige the regular submission of financial statements from companies.