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ACCA Applied Knowledge · Business and Technology · Financial information provided by business

Which of the following best describes a key difference between financial accounting and management accounting?

Financial accounting reports historic results in a standard, regulated format to external users such as shareholders and lenders. Management accounting is designed for internal managers, can include forecasts and is produced in whatever format is useful, with no legal requirement to follow accounting standards.

  1. AFinancial accounting is mainly prepared for internal managers, while management accounting is prepared for shareholders
  2. BFinancial accounting reports on past performance in a standard format for external users, while management accounting information is tailored to managers' needs and may look forwardCorrect
  3. CFinancial accounting must include forecasts, while management accounting must follow IFRS Accounting Standards

Explanation

Financial accounting produces historic statements for external users in a regulated format. Management accounting is produced for internal decision makers, can be forward looking and has no mandatory format. The other options reverse the users or misstate the regulation.

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