What Is the Relationship Between Accounting and Financial Management (2024)

FAQs

What Is the Relationship Between Accounting and Financial Management? ›

Financial management is more of an ongoing process, while accounting management is a periodic process. The two concepts also differ in terms of their time focus. Accounting management focuses more on past activities. Financial management focuses more on current and future events.

Accounting involves reporting past financial transactions, whereas other management involves planning future transactions. Accounting gives the company's financial position, whereas financial management provides a holistic view of the business activities and provides insight into the future generation of wealth.

Financial accounting and financial management are two separate functions of finance where financial accounting requires reporting past financial transactions. In contrast, on the other hand, financial management requires planning for future transactions.

Accountancy and business management are related through management accounting, which provides information to managers for decision-making and financial accounting, which offers information about the financial performance of the entity.

Financial Management and Accounting

Recording Transactions: Accounting records financial transactions and provides data to FM for analysis. Financial Statements: Accounting generates financial statements (e.g., balance sheets, income statements), which FM uses to assess the company's financial health.

Accounting: The primary objective is reporting the financial information or transactions using Generally Accepted Accounting Principles (GAAP). Financial Management: The objective is to assist the management in planning as well as decision-making through detailed information on different matters.

Financial accounting looks at the entire business while managerial accounting reports at a more detailed level. Managerial accounting focuses on detailed reports like profits by product, product line, customer and geographic region.

The importance of accounting within business comes from its ability to keep track of an organisation's financial health and reliability. Without an accountant, business owners would not be able to analyse their financial health or know whether their business is profitable.

Though there are 12 branches of accounting in total, there are 3 main types of accounting. These types are tax accounting, financial accounting, and management accounting. Management accounting is useful to all types of businesses and tax accounting is required by the IRS.

Both management accounts and financial accounts will include key financial metrics such as assets, liabilities, revenue and expenses. Both management accounts and financial accounts can be used to provide an understanding of your company's financial performance.

What is the function of financial management? ›

Decisions And Control – Making financial decisions and maintaining control over the organization's money are essential responsibilities is a primary role of financial management. They employ methods like ratio analysis, profit and loss analysis, financial forecasting, etc.