Accounting Basics

Management Accounting

As  its name implies, Management (or Managerial) Accounting provides that  information which is used by managers within the company.  The  information provided can be as broad as long range financial projections  or as detailed as analyzing cost variances (ie budget overages).   Wikipedia defines management accounting as being " concerned with the  provisions and use of accounting information to managers within  organizations, to provide them with the basis in making informed  business decisions that would allow them to be better equipped in their  management and control functions."

While  management accounting concerns the internal use of information,  Financial Accounting concerns the external use of accounting  information.  Of course financial accounting concepts are used in  management accounting.  Financial accounting involves providing  information which is useful to external users such as prospective buyers  and investors, creditors, government agencies, etc.  Financial  Statements are the most provided piece of information.  These include  the Balance Sheet and Income Statement (to be explained in a future  post).  Wikipedia defines financial accounting as "the field of  accountancy concerned with the preparation of financial statements for  decision makers, such as stockholders, suppliers, banks, government  agencies, owners, and other stakeholders.  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."