There are limitations, but financial management accounting perform a Essay - 1

There are limitations, but financial management accounting perform a fundamental role in the measurement of performance within the organisation'' Critically evaluate the statement - Essay Example Financial accounting on the other hand is the use of financial data within a company to analyse the performance of the company. Financial accounting encompasses the use of Generally Accepted Accounting Principles to produce financial statements that critically evaluate the financial performance of a given company over a certain period of time (usually a year). During the course of financial accounting, a record is kept for all the business transaction of a company and that record is formally produced in the form of formal statements. These financial statements are used by to facilitate external users such as the shareholders, lenders and suppliers of an organisation (Bushman et al, 2001). Both these methods of performance management and evaluation may seem identical as per their definitions but in reality they both are quite different from each other. Management accounting is basically information generated and used by the employees and the management of that company, the information and the data generated within the management accounting scope is future oriented and carries forecasting value to the management of the organisation. Financial accounting on the other hand involves the use of Accounting Standards (mainly IASs); which are a set of principle issued by different countries. Financial accounting information is generally used by many different people such as the lenders, shareholders, employees, etc. This information is easily available to everyone, in contrast, the managerial accounting information is not that easily available. The nature of management accounting is forward looking i.e. it tends to focus on future issues and the reports are generally produced whenever they are needed whilst the financial accounting nature is concerned with the past performance of the company and the reports involved are usually time bound i.e. they are usually produced yearly, half yearly, quarterly, etc. (Bacidore et al, 1999;