What is the difference between financial accounting and management accounting?

• Using financial statements to report to investors, government authorities, stock exchanges, other interested parties
• Statements: balance sheet, income statement, cash flow statement

• Must follow "generally accepted accounting principles" (GAAP)
• Perspective: historic; reporting on what happened in the past

• Routine reporting to managers for cost planning and control, performance evaluation
• Routine reporting to managers on profitability of products, customers, markets, etc.
• Non-routine reporting to managers for strategic and tactical decision-making

• Not restricted by GAAP rules
• Perspective: utilizes historic data, but emphasizes the future
• The remainder of this section explores financial accounting in greater detail
• Management accounting issues are discussed in the following section
• What are the basic financial statements and what is the purpose of each?

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