Question

Describe the major differences between management accounting and financial accounting for the following:

1. Primary users
2. Focus and emphasis
3. Rules of measurement and reporting

Answer 1

Management accounting and financial accounting have differences in terms of primary users, focus and emphasis, and rules of measurement and reporting.

Step-by-step explanation:

Management accounting and financial accounting are two branches of accounting that serve different purposes and users.

1. Primary users: Management accounting provides information for internal users, such as managers and executives, to support decision-making. Financial accounting provides information for external users, such as investors, creditors, and regulators, to assess the financial position and performance of a company.
2. Focus and emphasis: Management accounting focuses on providing detailed, timely, and relevant financial and non-financial information to support planning, controlling, and decision-making within the organization. Financial accounting focuses on summarizing and reporting financial information in accordance with generally accepted accounting principles (GAAP) to provide a true and fair view of the financial statements.
3. Rules of measurement and reporting: Management accounting does not have strict rules and allows for customization based on the needs of the organization. It can use both financial and non-financial measures. Financial accounting follows specific rules and standards, such as International Financial Reporting Standards (IFRS) or Generally Accepted Accounting Principles (GAAP), for measurement and reporting.