Question

Discuss the difference between management accounting and Financial Accounting and explain how Management Accounting information can assist management.

Answer 1

Management Accounting

• Assist managers at all level by providing necessary information.
• It is for internal use.
• Measure the efficiency and performance of divisions
• No any principles are followed.

Financial Accounting

• Periodical report prepared for outsiders users like government,suppliers
• It is governed by GAAP
• Measure the efficiency and performance of whole organisation.
• It is compulsory in business organisation in compliance with law.

How Management Accounting can assist management

• It helps in decision making like whether to buy or manufacture goods.
• It predict cash flow.How much expenses and revenue increase or decrease in future .
• It helps to find out discrepancies between what was predicted and what is achieved.
• It use activity based costing to allocate cost over many products.
• Many tools are used to forecast trend like ratios,simulation

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