The purpose of this paper is to evaluate and present financial and management accounting; their role in business; importance of financial and management accounting; benefits to business operations and limitations of financial and management accounting…
According to the research accounting is the process of representing financial information of any business entity in the form of various financial statements which can be used by the stakeholders to help in various decision making process. Accounting can be of two forms, viz. management accounting, used for internal purposes and financial accounting, used for external purposes. Both of these accounting forms play a very critical role in any form of business. All the accounting records serve as an evidence of the occurrence of a particular monetary transaction. A reliable and relevant accounting record helps any government institutions manage its various resources and also the accountability of any business management while taking any decisions is held responsible through correct and proper financial information. Earlier, accounting procedures followed by any business entity followed a traditional approach which gave way to measuring the business performance quantitatively. But now days, any modern business is more concentrated using non-financial measures to measure the business performance and it is the daily routine task of either a public or private financial institution to prepare the business performance report accordingly. Any financial institution has its own financial limitation and thus has to work within that limitation to work for the betterment of the organisation and justify the investor’s investment in the organisation. Thus, the function of Financial and Management accounting system in business organizations lies in effectively managing its financial assets, resources and regulations. 2. Financial Accounting Financial accounting is that part of accounting which is used for external purpose of a business entity and it sets out procedures to represent the accounting records of any business in a summarised form in the form of different financial statements. These financial statements are for the purpose of use by the stakeholders of an organisation for their own decision making purposes. 2.1 Role of Financial Accounting in Business Financial accounting is used by any business as a service function. Financial accounting serves for the purpose of representing the daily transaction records of a business after recording them, analyzing them, interpreting them and then reporting them in the form of financial statements. The statements of finance are documented based on a set standard used by every country that conforms to Generally Accepted Accounting Principles (GAAP) of that particular country and this is again must be accepted by the Financial or International Accounting Standard Board. In a nutshell, GAAP is the overall governing or regulatory body of accounting practices to be followed. Any business organisation is obliged to comply with these set out principles or guidelines and is a part of the legal responsibility of the organisation. The financial statements prepared by a business organisation serve as a purpose of representing the true and fair view of the business affairs that is to be used by its stakeholders for their decision making purposes. Any business concern has mainly two different disciplines of accounting. One is general accounting and the other, accounts payable. General accounting is what discussed earlier, involves analysing and ...
Cite this document
(“Financial and Management Accounting: The Contribution to Effective Essay - 2”, n.d.)
Retrieved from https://studentshare.net/finance-accounting/5974-financial-and-management-accounting-the
(Financial and Management Accounting: The Contribution to Effective Essay - 2)
“Financial and Management Accounting: The Contribution to Effective Essay - 2”, n.d. https://studentshare.net/finance-accounting/5974-financial-and-management-accounting-the.
This research is governed by the following research questions, which will aid in attaining objectives and aim of the research: Is there a difference between management accounting and financial accounting and does it benefit a business to incorporate both strategies in business? To understand this concept, it is of relevance to distinguish management accounting from financial accounting.
It can be derived from the report that the objective of financial accounting is to produce the financial reports like profit and loss account and balance sheet which is mainly used by the external stakeholders of the company, when the objective of management accounting is to suggest the future paths to the company management after analyzing the financial statements produced by the financial accountants and the cash flow statement.
Accountability 12 Conclusion 13 Reference 15 Abstract This study represents one of the most important areas of management accounting i.e. desirability and effectiveness of accounting for management control. Accounting is the most effective device used by managers and management for organizational control.
The expert accounting conception and scientific accounting dexterity regarding measurement of performance, analysis, auditing and final reporting are as well pertinent to the supervision of healthy and sustainable ecological performance. With the increased international community's recognition of the ecological concerns, so has there been a simultaneously increased demand on accountants to provide comprehensive ecological costs and information on performance.
Management accounting is the process of identifying, recording, classifying, analysing and reporting of all cost aspects of information for management decisions, planning and control, performance evaluation, and even strategic purpose (Berry & Jarvis, 1997; Dyson, 2003; Glynn & Murphy, 1998; Wood & Sangster, 2002).
This aspect of accounting concerns itself with learning about the effect an organisation has on society and about its relationships with an entire range of stakeholders to whom it is accountable. These would include all those groups who affect and/or are affected by the organisation and its activities.
The current dilemma in the business world is that financial accounting becoming more harmonized whereas the management accounting varies with firms and regions. This assignment doesn't aim to show that how this harmonized financial accounting occurs or what are the differences between the two.
The absorption costing method concentrates on both the fixed as well as the variable costs. Hence this method is not very beneficial in the decision making and budgeting processes (Garrison, Noreen and