Imagine you have missed out on the city’s biggest technology shopping carnival last weekend and just can’t get over it! You decide to catch up with two of your closest buddies, Rajeev and Deepti, who have been there and find out about their experience. Rajeev is a Senior Manager- Financial Accounting while Deepti is an Analyst, Management Accounting.
While Rajeev would tell you all about the number of outlets, the crowd, brands showcased, the theme of the carnival etc, Deepti would go a step ahead. Apart from the regular stuff, she would also tell you about the special offers given, how you could avail of those offers online, the expected launch dates of the next iPhone version, the best time to plan the purchase of your dream LCD and how you can choose the best products in the least possible time in the next gizmo shopping festival.
So, did you notice the difference? While Rajeev would meticulously report the facts, Deepti would draw insights and help you in decision making. This is the major distinguishing factor between Financial Accounting and Management Accounting.
When we think of accounting, the first things that cross our mind are the financial statements: (Balance Sheet, Income statement and the Cash Flow). While these form the structural system, accounting is more than just financial statements and reporting standards. Apart from fulfilling statutory compliance, one of the main objectives of these statements is to provide insights for decision-making and ensuring operational efficiency of an organisation. While Financial Accounting address the primary goal of statutory compliance, Management Accounting takes care of the later.
Since both of these are unique branches of accounting, the knowledge required to handle these are also specialized. Financial reporting and decision-making are two sides of the same coin and most organisations prefer professionals who are qualified and expert in the respective branches.
Let us look a little deeper and find out the major differences between the two branches:
Now that you know the major differences between Financial Accounting and Management Accounting, it is easier for you to understand the nuances of each role and its importance within the organisation. From a career perspective, both these roles are highly sought after in today’s time. All you need is a reality check and bit of soul searching to find out which one of these two is more aligned to your skill sets. With global certifications like ACCA and CIMA for Financial Accounting and Management Accounting, respectively, you have an opportunity to take your accounting career to new highs and be an asset to your organization.