Finance and accounting are complex disciplines that provide knowledge about public finance, banking, financial management, the securities market, accounting and accounting activities at enterprises, organizations, government agencies, and much more. Accounting is the art of systematically recording business events and transactions to determine a company’s financial position and profitability at the end of a financial year. It’s not the same as finance. Technically, finance is the part of the economy that allocates and manages resources. Knowledge of Finance and Accounting will allow you to know the mechanisms of functioning of financial markets, enterprises, banks, and other organizations, to develop the skills of predicting and researching economic phenomena occurring in enterprises and the market. The obtained qualification will allow you to effectively solve the problems of accounting and financial management and manage the activities of economic organizations.
Concepts Of Accounting and Management Accounting
We will use theoretical data to understand the main differences between accounting and management accounting. Accounting is a system for preparing information on the state of an organization’s debt, liabilities, and capital in financial terms, brought into a single whole by a continuous and documentary reflection of the facts of the company’s economic activities. Many people think that accounting and finance are the same, but they are two different disciplines. While accounting focuses on providing a company’s financial information to users for rational decision-making, finance focuses on matters relating to money, investments, credit, banking, and markets. The objects of accounting, in this case, are both the property of the organization and its obligations, as well as all business transactions carried out in the course of work. The primary purpose of financial accounting is to obtain accurate general information about the work of the company and its financial position. Upon the activity, it will be possible to control the expediency of economic operations, the availability and movement of capital, debt, and the use of enterprise resources.
Difference Between Accounting and Management Accounting
Accounting and management accounting exist for different purposes, which is their main difference. The purpose of management accounting is operational analysis and planning of activities. Further divergences arise due to other goals.
- The main difference is the end-user of information. Suppose the balance sheet is more interesting for management when evaluating activities for the past period, the tax service for profitability analysis, and auditors for checking the reflection of the facts of economic activity. In that case, management accounting data is needed only by company managers for short-term and long-term planning of activities.
- Accounting methods differ. The accountant will be guided by PBU and other regulations when forming accounting entries. When generating operational data on management accounting, it is necessary to rely on the instructions of the head to which item of income or expense this or that figure belongs.
Purposes Of Record Keeping
Financial accounting is designed to accumulate, systematize, and present an objective and complete picture of all aspects of the economic activity of an enterprise, the state of finances, and property. The managerial part of accounting serves the purpose of effectively managing an economic entity. With the help of this type of accounting, cost analysis is carried out, actual financial results of work are evaluated, and opportunities for reducing costs and increasing income are determined. Management accounting reflects accurate data on how much money an enterprise has that can be freely disposed of. Financial dryly considers how much money has been received and how much has been spent, without a detailed breakdown of where and for what.
Subject Of Accounting and Grouping of Costs
The object of financial accounting is the entire activity of the enterprise. Management accounting can be detailed by structural divisions or areas of income generation. Financial accounting divides costs into groups according to economic content into several components:
- The cost of raw materials and materials (minus the cost of returnable waste), labor costs with deductions, depreciation of fixed assets, and other costs.
- Management accounting combines costs by types of products, work performed, and services according to costing items. How exactly to systematize costs is decided by the management of the company.
Despite the above visible differences between financial accounting and accounting, it is impossible not to recognize their close similarity. Both types of accounting are used as a tool for making clear management decisions and assessing the situation in the enterprise and the right prospects, which gives the main similarity to financial and accounting. Most of the information collected by financial accounting is used simultaneously in the management part of accounting. Uniform rules for managing preliminary information and accounting principles are applied when trying to avoid data duplication.About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.