Management Accounting And Financial Accounting: Know The Difference

Management Accounting And Financial Accounting: Know The Difference

Management Accounting and Financial Accounting

Management accounting involves analyzing and providing cost information to the internal management for planning, controlling, and decision-making. It refers to the accounting information developed for managers within an organization. At the same time, financial accounting includes providing information to stockholders, creditors, and others outside the organization. Management accounting is manager oriented. Before you hire a management consultant in Dubai, you should know the basic differences between financial accounting and management accounting so that you identify your needs and decide accordingly.

Management accounting assists the internal users of the company in making well-informed decisions. It encompasses many facets of accounting aimed at improving the quality of information delivered to the management about business operation metrics. The types of management accounting may include cash flow analysis, product costing valuation, constraint analysis, inventory turnover analysis, financial leverage metrics, AR management, budgeting, trend analysis, and forecasting.


The main objective of financial accounting is to disclose the end results and the business’s financial condition on a particular date. In comparison, financial accounting is more about revealing the firm’s business performance. In the case of management accounting, it produces useful information for a company’s internal use. The management consultant in Dubai will collect the information that encourages strategic planning, helps them set realistic goals, and encourages an efficient directing of company resources.


Management accounting can be said to be management’s discretion, and there are no mandatory requirements for its maintenance, but some frameworks and formats are still provided. But when it comes to financial accounting, it is a compulsory requirement for every organization to disclose its financial statements, which are governed by accounting standard boards, companies’ laws, and the government.

Governing Principles

Management accounting is not bound by a legal basis for the preparation of its statements and is hence designed based on the requirements of the management team. In contrast, financial accounting statements are prepared on the basis of ‘Generally Accepted Accounting Principles’ (GAAP), which is different for every country.

Independent Audit

Financial accounting needs mandatory independent audits in most countries. While there is no such requirement for management accounting, the management can take the initiative to conduct an independent audit for efficient and effective management.

Segment Reporting

Financial accounting is concerned with the whole business, and it is an end in itself, and the accounting standards in some countries bind companies to do such reporting in defined formats. Management accounting includes a specific area for their analysis, and these segments may consist of product line, geography, manufacturing unit, etc.

The Bottom Line

It is important for businesses to differentiate between their financial and management accounting needs, especially if they are looking to hire a consultation agency, as they offer a wide range of services that includes everything from taxation, VAT, audit, and the different types of accounting. Management accounting can be modified to meet the needs of its intended users.