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CMA Intermediate · Cost Accounting · Introduction to Cost Accounting

Which statement correctly contrasts financial accounting with management accounting as taught in the CMA syllabus?

Financial accounting follows statutory requirements and accounting standards, whereas management accounting has no prescribed format and is shaped by what managers need for planning, control and decisions. The other statements wrongly reverse users, time orientation or legal compulsion.

  1. AFinancial accounting is prepared mainly for internal managers, while management accounting is prepared mainly for shareholders and regulators
  2. BFinancial accounting follows statutory requirements and accounting standards, while management accounting has no prescribed format and is designed to suit managerial needsCorrect
  3. CManagement accounting deals only with historical data, while financial accounting deals only with projections
  4. DManagement accounting is compulsory under the Companies Act, 2013 for every company, while financial accounting is optional

Explanation

Financial accounting statements must follow law and accounting standards and are meant for external users. Management accounting has no mandatory format and is tailored to internal decision needs. Option A reverses the user groups, and option C reverses the time orientation.

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