Second, in financial accounting, financial statements are deemed important while users of management accounting focus on accounting reports as the most important products (Stolowy & Lebas 2007). Third, in financial accounting, the IFRS or IAS determine what is supposed to be included in financial reports and statements while in management accounting, managers determine what they want captured in accounting reports. Fourth, financial accounting focuses on historical information whereas management accounting basically utilizes forecasts or focus on future information (Rajasekaran & Lalitha 2011). Fifth, while financial accounting put emphasis on data reliability and objectivity, management accounting emphasizes on relevancy of data. Sixth, financial accounting yields reports about the entire company while management accounting yields reports that suit the needs of the management. Seventh, financial data are usually subject to audit verification while management data are no subject to auditing process (Rajasekaran & Lalitha 2011). Companies are required to prepare financial statement at the end of their trading periods to disclose information that is deemed crucial for various users of financial statements.
1) Potential investors: Potential investors require financial statements to help them assess financial viability of putting their investment in a company. Based on the information disclosed in the financial statement, for instance profits in profit and loss account, investors are able to forecast future dividends. Also, potential investors may use financial statement figures to gauge the risk associated with investing in a particular company (Gibson 2009). For instance, investors may use high fluctuation in the reported profits of a company as an indication of high risk. Consequently, financial statements assist prospective investors in making investment decisions.
2) Shareholders: Financial statements assist