Managerial vs. Financial Accounting

Managerial accounting and financial accounting are two of the most prominent branches of accounting.

They both deal with processing information which is useful in decision-making; however, they have notable differences that distinguish them from each other.

Managerial accounting processes economic information to be used by management in making decisions.

Financial accounting involves the preparation of general-purpose financial statements used by various users in making informed decisions.

The differences between managerial accounting and financial accounting can be summarized according to the following bases of comparison:

Difference between Managerial and Financial Accounting

Basis Financial

1. Users

Internal and external

General-purpose financial statements can be used by external and internal users. However, they are prepared pimarily for external users, such as the investors, lenders and creditors, and the government.


The reports prepared in managerial accounting are strictly for use by internal users, i.e. the management.

2. Compliance with accounting standards


Financial accounting requires strict compliance with established accounting standards.

Not required

Management accounting is not required to follow accounting standards since the only users are the members of the management.

3. Time orientation


Financial accounting processes historical information and summarizes them in the preparation of financial statements.

Current and future

Management accounting deals with current problems of the company. Also, management accounting involves the preparation of budgets and forecasts.

4. Emphasis

Reliability, verifiability, objectivity of financial information

Relevance and timeliness, to provide the maximum aid in management decisions

5. Necessity


Financial accounting is required by law. Companies are mandated to furnish financial statements periodically.


Management accounting is not mandatory. However, a company that does not use it will suffer great consequences.

6. Purpose of reports


Financial statements provide general information, addressing the common needs of its users.


The financial reports in managerial accounting address a specific issue or concern.

7. Details of reports


Financial statements present data in an summarized and concise way.

More detailed

Financial reports carefully detail all information that the management should consider in making specific decisions.

8. Sources of data

Sources within the company, i.e. the accounting records of the company

Any source, both internal and external such as interest rates, political environment, economic and industry concerns, etc.

9. Frequency of reports

Financial statements are usually furnished monthly, quarterly, annually.

Financial reports in management accounting are prepared as the need arises.

There have been arguments as to which between financial accounting and managerial accounting is more important. However, it is somewhat pointless to argue on which is more important. Each has its own purpose in the business environment.

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