Write 6 page essay on the topic Management Accounting.Download file to see previous pages... In a case where the building is not being utilized, the cost which is $9000 will be paid.Explanation: The v

Write 6 page essay on the topic Management Accounting.

In a case where the building is not being utilized, the cost which is $9000 will be paid.

Explanation: The variable unit cost (unit cost of hamburgers) remains the same even if the number of units sold change. However the total cost increases as the increased number units is multiplied by the unit cost. On the other hand the unit fixed cost and total fixed cost (building rent) remains the same since its cost is not dependent on the number of units sold therefore all the cost has to be paid for the rent.

Financial accounting illustrates the performance of a business over specific periods (usually at the end of an accounting year). They are directed towards external users of accounting information such as investors and creditors. These accounts typically present a historic view on the financial performance of the business [1]

Management accounting is used by the management to record, plan and control the activities of a business and to help in taking decisions. They can be made for any period or accounting year. It provides information for internal users like the employees, managers, and executives of the company. Management accounts largely focus on analyzing historical performance to give budgets and forecasts for the future. [1]

GAAP (generally accepted accounting principles) and Accounting Standards are followed in financial accounting while in managerial accounting there are no legal requirements to prepare management accounts. [2]

Reporting Format

In management accounting confidential financial reports are prepared for the exclusive use of top management within an organization. Specific accounting formulas and equations are used to reach to these reports. Such reports may include:

Sales Forecasting reports.

Budget analysis and comparative analysis.

Feasibility studies.

Merger and consolidation reports

While on the other hand financial accounting helps prepare financial reports, that include the basic reporting requirements of profitability, liquidity, solvency and stability. Both internal and external users can view these reports. [2]

Time Period of Information

Managerial Accounting gives the management those reports that are future-oriented, while Financial Accounting give reports based on historical information to use statistical methods to reach at future values. [2]

Detail of Information

The details from financial accounts provide information on the business as one unit rather than analyzing the different elements of the business. [2]

The management accounts focus on specific areas of the activities performed by the business such as information about its products, the different locations of business or the information about the departments. [2]

Nature of Information

The nature of information provided by financial accounts is mostly monetary.