Atrill & McLaney (2008) describe Finance (also referred to as financial management) as being something likened to accounting rather than accounting itself. Atrill & McLaney (2008) go on to describe finance as existing to aid decision makers on how to plan a business, by assessing the needs of the business and organising the finances to suit these needs (being simply to make investments for good returns, or additionally numerous other arenas where financial needs must be assessed).
Atrill and McLaney (2008) outline Financial Accounting quite thoroughly and it can be summarised as the following: Financial Accounting is predominantly produced to summarise the overall financial standing of a business in a formal, regulatory defined format for public view (eg: investors/potential investors, governments, general employees, suppliers, competitors etc.). Financial accounts are usually prepared out of necessity once (in some cases twice) per year and are often a requirement by many countries tax laws.
Atrill and McLaney (2008) describe how, as the name suggests, this form of accounting is used by management in a company and are often used to aid in specific decision making requirements (such as new purchases, new investments, etc.). Management accounts are mostly tailor-made both in format and in financial area to best suit the requirements of the specific manager and specific task at hand.
Similarities and Differences
Finance itself is a broader outline of the processes involving finance in a business, which is arguably the most important aspect of a business. Finance itself would encapsulate the latter two of the above definitions.
As described above, Financial Accounting provides predefined forecast on how a business has been running, financially, in the past period; which, as Atrill & McLaney (2008) point out, can also be used to forecast future performance. Management Accounting is predominantly used for projections or forecasts on new ventures or current ventures that a business is partaking in and are generated if and when they are required by management, rather than at predefined times as required by regulatory bodies.
To conclude, “management accounting seeks to meet the needs of the business managers and financial accounting seeks to meet the needs of the other user groups” (Atrill & McLaney, 2008).
Atrill, P. & McLaney, E. (2008) Accounting and Finance for Non-Specialists. 6th Edition. Financial Times Press.