compare between the roles of management accounting and financial accounting
Answers
ROLE OF MANAGEMENT ACCOUNTING:- Management accountants aid managerial planning and commercial decision-making tasks by providing appropriate financial information and undertaking related accounts administration. Good maths and computer skills are required for a career as a management accountant. Management accountants look after a company's accounts.
ROLE OF FINANCIAL ACCOUNTING:-Financial accounting serves the following purposes: producing general purpose financial statements. producing information used by the management of a business entity for decision making, planning and performance evaluation. producing financial statements for meeting regulatory requirements.
PLS MARK BRAINLIEST
Answer:
Management Accountant Role
# 1. Stewardship Accounting:
Management accountant designs the frame-work of cost and financial accounts and prepares reports for routine financial and operational decision-making.
Management Accountant Role # 2. Long-term and Short-Term Planning:
Management accountant plays an important role in forecasting future business and economic events for making future plans i.e., long-term plans, strategic management accounting, formulating corporate strategy, market study etc.
Management Accountant Role # 3. Developing Management Information System (MIS):
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The routine reports as well as reports for long-term decision-making are forwarded to managerial personnel at all levels to take corrective action at the right time.
The management accountant also uses these reports for taking important decisions.
Management Accountant Role # 4. Maintaining Optimum Capital Structure:
Management accountant has a major role to play in raising of funds and their application. He has to decide about maintaining a proper mix between debt and equity. Raising of funds through debt is cheaper because of tax benefits.
However, it is risky as because interest on debt has to be paid whether the firm earns adequate profits or not. Management accountant has, therefore, to maintain an optimum capital structure and give due consideration to various cost of capital theories, leverage and possibility of trading on equity.
Management Accountant Role # 6. Control:
The management accountant analyses accounts and prepares reports e.g., standard costs, budgets, variance analysis and interpretation, cash and fund flow analysis, management of liquidity, performance evaluation and responsibility accounting etc. for control.
Management Accountant Role # 7. Decision-Making:
Management accountant provides necessary information to management in taking short-term decision e.g., optimum product mix, make-or-buy, lease or buy, pricing of product, discontinuing a product etc. and long-term decisions e.g., capital budgeting, investment appraisal, project financing etc.
Role of Financial Accounting
In a business, the financial accounting function is responsible for periodically reporting pecuniary information to business owners. Interested parties such as regulators, customers, investors and creditors often require this financial information. If banks refuse to rely on your accounting records, you will have trouble securing loans for your business. Financial accounting dictates the amounts you owe to suppliers, what customers owe you, operating costs, payroll costs and available cash. You can use financial accounting to analyze significant aspects of your business, such as monthly sales or the reasons for high expenses in one month.
System of Control
Financial accounting forms a basic set of financial controls for your business. This requires that you have adequate knowledge and understanding of financial accounting principles and conventions so you can assign responsibilities, record financial information and divide duties among employees. Financial accounting, therefore, enables you to monitor such duties and their results more closely. Sound financial records demonstrate financial controls and oversight that reduce the risk of fraud and theft, something that investors like to see.
Company Analysis
Financial accounting can produce financial information in a manner that makes interpreting business performance easy. As a business owner, you can use financial accounting to develop ratio analyses and use those ratios to perform more detailed analysis of various aspects of your business. You can measure your business’s cash position or measure your profit or sales ratio and compare it with your past performance or the performance of competitors. Financial accounting helps you formulate your future course of action or strategy and measure the success of this strategy with the financial information produced from another period.
Basis
To be a meaningful, value-added function, your company's financial accounting must follow certain conventions. It must be relevant, which means the information affects stakeholder decisions. It must present objective information that can be measured and expressed by accepted standards. Financial accounting must be feasible, so the cost of presenting this information should not exceed its benefit. The information that you present must be consistent, and you must meticulously follow the same accounting principles for all records.
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