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Concept of Management and Financial Accounting

University: London metropolitan university

  • Unit No: 5
  • Level: High school
  • Pages: 25 / Words 6243
  • Paper Type: Assignment
  • Course Code: BA4F04
  • Downloads: 871
Question :

This assessment will cover the following questions:

  • Examine the function of management and financial accounting and what are the key differences between these two.
  • Analyse the profitability, debt and liquidity and investment structure of the company.
  • What are the necessary improvement that can be made to enhance performance of the company.  
Answer :

INTRODUCTION

In recent times, business units lay more emphasis on undertaking competent strategic and policy frameworks with the motive to make optimum use of funds. Moreover, without having a wide framework business unit faces difficulty in getting the desired level of outcome or success. Now, several tools & techniques are available that firms can use before making decisions pertaining to investment and financing decisions. The present report is based on different case situations which will develop an understanding of the concept of management and financial accounting. Further, it will shed light on the aspects on the basis of which management accounting differs from financial. Along with this, the report will exhibit how concepts pertaining to ratio analysis and capital budgeting aid in decision-making.

QUESTION 1

Explaining Management and Financial Accounting

Management accounting:

It refers to the presentation of accounting information which in turn is used by management team for the formulation of a policy framework regarding day-to-day activities. MA assists the management team in performing functions related to planning, organizing, staffing, directing and controlling. In other words, the main function of MA is to make appropriate forecasts about production and selling aspects, cash inflow & outflow (Eldenburg and et.al., 2019). In addition to this, aspects of MA also focus on identifying specific cost centres and delegation of roles and responsibilities which in turn helps in achieving success.

Financial accounting:

It implies the collection, summarization and presentation of monetary information that results from business transactions. FA reports furnish information about operating profit and business value to the concerned stakeholders (Steccolini, 2019). Hence, financial accounting technique is undertaken by businesses with the motive to serve information to all the stakeholders in an acceptable and standardized format. In this way, it can be stated that the financial accounting process is employed by the firm to show its financial position and performance to both internal and external stakeholders (Weetman, 2019). There are several functions which in turn associated with financial accounting aspects. This in turn includes recording of systematic records, communicating results to the stakeholders, budget preparation and cost control. It is highly significant and helps in analyzing areas where improvements are needed. In addition to this, by analyzing performance, the company can set an appropriate budget for the upcoming time frame.

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Presenting the Difference between Management and Financial Accounting

Differentiation between management and financial accounting is enumerated below:

Basis of difference

Management Accounting

Financial Accounting

Meaning

It helps the management team in making effectual decisions about business.

FA refers to the classification, analysis, recording and summarization of financial affairs associated with the company (Stockenstrand and Nilsson, 2017).

Objective

MA is undertaken by the firm to offer the management team a wide framework for ensuring informed decision-making (Chibili, 2019).

The main motive behind undertaking financial accounting practices is to provide outside parties such as investors, creditors etc with suitable information for decisi

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