LUBS 1235 1.1 Explain the purpose of, and the differences between, financial and management accountancy

What is the main purpose of Financial Accounting

To provide information to external users such as shareholders, investors, and regulators

What are the main financial statements produced in financial accounting

Income Statements

Statement of Financial Position (Balance Sheet)

Statement of Cash Flow

Is financial accounting mainly concerned with the past or future

The past - it reports on historical financial performance after the year end

What is Management Accounting primarily used for

To provide information to internal users (management) for decision-making and control

Does management accounting focus on the past or the future

The future - it involves planning, budgeting, and forecasting.

What types of information does management accounting use

Both financial and non-financial information, including past data and future estimates

How often is management accounting information prepared

On a timely basis - often monthly or even weekly

Is financial accounting regulated

Yes - it follows Company Law and Accounting Standards

Is management accounting regulated

No - it is formally not regulated and can be adapted to organisational needs

How does the level of detail differ between financial and management accounting

Financial Accounting: Summarised information

Management Accounting: Detailed, specific, and often includes performance metrics