Financial and management accounting Essay

Draft of concluding essay

Not merely are comptrollers required to enter and reflect an organisation ‘s concern activities accurately but they should besides put more accent on run intoing the demands of company direction. Therefore, modern accounting is divided into two elements, fiscal accounting and direction accounting. Both of them are based on accounting information which is recorded in conformity with concern minutess. Financial accounting is the procedure that classifies, steps and records concern minutess in order to fix the fiscal statements after a specified period. However, direction accounting is the procedure that identifies, collects and analyzes peculiar accounting information in order to assist company directors to do determinations and program and command the concern. This essay will sketch several common features shared by fiscal and direction accounting, and so depict their differences. Finally, there will be a treatment on how both fiscal and direction accounting impact company direction.

Financial and direction accounting exist as the two elements of modern accounting portion several key characteristics in accounting pattern. First and first, fiscal accounting provides information for internal users the same as direction accounting does. Directors and stockholders are chiefly internal users. Mangers are as company managers affect company direction. They besides discharge responsibilities to guarantee concern resources are protected and applied efficaciously and expeditiously. Weetman ( 2006, p. 13 ) notes that directors are the direct participants in the concern activities, so they are responsible for efficiency in utilizing concern resources. Stockholders are investors who use accounting information as grounds to make up one’s mind whether to purchase, keep or sell their portions. They are besides interested in the organisation ‘s fiscal place and public presentation.

Furthermore, fiscal accounting is built on the footing of day-to-day bookkeepers ‘ records of concern minutess. A peculiar beginning of information presented in fiscal statements is used in direction accounting for its intent in company direction. Therefore, the same accounting information footing will be helpful with company direction. Finally, they portion two features of accounting information, relevancy and dependability. All the information collected for the intent of fiscal and direction accounting is required to be related to peculiar concern activities. It is really of import to roll up relevant informations for the readying of fiscal statement. Likewise, directors will do determinations harmonizing to the relevant analysis in the accounting information. A recent survey conducted by Garrison and Noreen ( 2003, p. 8 ) shows that both fiscal and direction accounting are required to supply relevant accounting information for the direction of companies. Reliability is another characteristic that accounting information should avoid important frauds. Both fiscal and direction accounting topographic point a heavy accent on the accounting information. For case, directors can straight read figures, such as net income and loss in fiscal statements. Therefore a true and just position from fiscal accounting is required in direction accounting. Management comptrollers besides predict future events and do determinations establish on dependable fiscal accounting information.

However, fiscal accounting besides provides services to the external users, such as authorities, debitors, providers, clients and so on. Several features of fiscal accounting are different from that of direction accounting, which helps in supplying information to both internal and external users. First, it is of import for the company to place sections of the concern. An overview of concern activities is presented by fiscal accounting via multiple studies on a period footing. The chief function of fiscal statements for company direction is that troughs communicate the primary information of fiscal public presentation and place to their users. The fiscal statements can demo how successful the company accomplish nucleus aim and show an feeling with the company as a whole. In contrast, direction accounting can supply studies for divisional sections. Sometimes troughs should see the peculiar accounting information when they make future programs for different sections. Drury ( 2008, p. 19 ) suggests that the profitableness of everyday information can be divided in merchandises, services, clients and distribution channels sections.

Second, fiscal statements are prepared follow by definite accounting rules and legal demands which were built on the footing of accounting regulative organic structures, such as International Accounting Standards Board, Accounting Standards Board in the UK and Financial Accounting Standards Board in the USA. Directors must hold some confidence that the fiscal statements are presented with a true and just position following the rules for their users. However, there is no demand for direction accounting to describe due to the legal duties. Alternatively, direction accounting chiefly concerns with the aid in determination devising for company directors.

Third, fiscal accounting studies are prepared with the past events in the companies, such as one-year studies in each twelvemonth. For an illustration, troughs ever evaluate their historic corporate and managerial public presentation from the statement of fiscal public presentation. In contract, direction accounting is concerned with future information every bit good as past information, such as budget. This is of import see how direction accounting affects company direction. Companies make budget programs at the beginning of the foretelling fiscal twelvemonth on the footing of the past studies reappraisal and future analysis. Budgeting helps companies ‘ limited resource be used in chase of managerial ends.

Finally, direction accounting provides studies on a regular basis instead than on an one-year footing, which is the manner that fiscal accounting provides studies. Fiscal comptrollers sort and record with concern minutess punctually, and so fix the fiscal statements at the terminal of fiscal twelvemonth. However, directors ever make determinations in the complicated and competitory concern state of affairs. Management comptrollers supply several accounting information rapidly in order to assist with direction ‘s planning and commanding the company instead than a regular clip.

To sum up, fiscal and direction accounting come out because of their different services intent. Fiscal accounting is concerned with supplying fiscal information to internal and external users. Management accounting purposes to fulfill the direction demands of peculiar information. Although they have several same features, fiscal accounting differs direction accounting in some country. Consequently, they affect company direction in several ways.

Mention

DRURY, C. ( 2008 ) . Management and cost accounting. London: South-Western.

GARRISON, R. H. & A ; NOREEN, E. W. ( 2003 ) . Managerial accounting. Boston: McGraw-Hill/Irwin.

WEETMAN, P. ( 2006 ) . Financial and direction accounting. An debut. Harlean carpenter: Financial Times Prentice Hall.