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There are two main disciplines in the accounting field and they are financial accounting and management accounting. Financial accounting is the discipline of accounting that involves the preparation of accounting information for the purposes of external users, and management accounts involve the preparation of financial information that is used in planning and control purposes internally within the organisation.

Key Differences Between Financial Accounting and Management Accounting

Financial accounting is prepared from historical data, and it is focused on the past. For example, in financial accounting the profit and loss will be looking at the business’ historical performance during the previous 12 months. Management accounts in their strict sense are forward looking and involve creating the business’ budgets, comparing current performance with budgeted performance with a view of improving or drawing lessons to learn for the future.

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