Question

Describe the main differences between financial accounting and managerial accounting, and the differences between accrual and cash accounting.

Answer 1

Particular	Financial accounting	Management Accounting
Purpose of Financial Reporting	The Purpose of financial accounting is provide true and fair view of financial position of the companies to companies all stakeholders. It helps assisting investors and other stakeholder in their decision making	The main objects of management accounting is to make informed internal companies decision. It helps internal management team to take decisions in prompt manner.
Periodicity	Financial accounts are prepared after 1 year.	Management account is concerned with short and long term planning
Historical / Futuristic	The financial accounting data is historical in nature.	The management accounting data is not only deals with Historical data but also with futuristic data.
Dependency	Financial accounting can be installed without proper management Accounting system.	management accounting cannot installed without prper financial system.
Regulatory Requirements	It is mandatory required by every corporate there for it is governed by accounting laws, GAAP etc.	It is at discretion of management.
Beneficiaries	Financial accounting is benefited to outsider like shareholder, bank, creditor , government etc.	Management accounting is benefited to CEO, CFO, Board of Director, Sales manager, Purchase manager etc.

2.

a. Accrual Base accounting means recording of transaction in books on basis of Due or received whichever is earlier.

For eg. Commission for Jan month will paid in Feb month there for as per accrual concept of accounting since transaction is due in Jan there for it shall be recorded in Jan month only although commission is not received in Jan.

Accrual concept of accounting shows True picture of the Business and It helps stakeholder to make informed decisions.

In accrual Base accounting there shall be Account receivable and Account payable accounts.

It is recognized by GAAP.

It is suitable for large business.

b. In Cash system of accounting recognize revenue when cash is received and expense is paid.

For eg. . Commission for Jan month will paid in Feb month there for in cash concept of accounting Commission paid will recognize only when cash is actually paid there for it shall be recorded in feb month not in jan month,

Cash system of accounting helps to identify how much cash is available at given point of time.

Cash system of accounting is not recognised by GAAP.

Cash system of accounting is suitable for small business.

In Cash system of accounting there is no accounts like accounts receivable and accounts payable.