Question

For your first post, define financial management. What are some other examples of the differences between financial management and financial accounting? Give examples.

Answer 1

Financial Management refers to the finance activity which involves procurement and administering of funds of the business. It is an operational activity concerned with obtaining and utilizing the funds for efficient functioning of the organisation.

Financial accounting differs from Financial Management in the following ways:

• Financial accounting is the art of recording past financial transactions. Financial management is the management of assets and liabilities of the firm
• Accounting is merely reporting past financial transactions, whereas the financial management involves planning about future financial transaction
• Financial statements of the company are used by creditors, investors, analysts, and regulators. Financial management is used by the management of the company.
• The objective of accounting is to provide financial information using standard procedures and rules. The objective of financial management is profit maximization and wealth maximization.
• Accounting helps to know the financial position of the Company. Financial management gives an idea on the business activities and the future generation of wealth.

For example, the financial statements like trading and profit and loss account and balance sheet are used by the external stakeholders. Financial management involves budgets preparation. These budgets are used by internal people, mainly by the management.