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ACCA Applied Knowledge · Business and Technology · Accounting and finance functions within business organisations

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

Management accounting mainly serves internal users and has no mandatory format, while financial accounting is prepared for external users under legal and accounting standard requirements. The other statements reverse the legal requirement, the time orientation or the reporting audience and frequency.

  1. AManagement accounting information is mainly for internal users and has no prescribed format, whereas financial accounting follows regulations and standardsCorrect
  2. BManagement accounting is a legal requirement for all companies, whereas financial accounting is optional
  3. CManagement accounting deals only with historical data, whereas financial accounting is forward-looking
  4. DManagement accounting is prepared annually for shareholders, whereas financial accounting is prepared monthly for managers

Explanation

Management accounting serves internal decision makers, can be forward-looking and takes any format useful to managers. Financial accounting is for external users and must follow law and accounting standards. The option reversing legal requirement is wrong because statutory financial statements are the mandatory ones.

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