Business Finance

Introduction

Business finance is mandatory for managing corporate governance and fulfils the business financial objectives successfully (Toumi, and Viviani, 2016). It is important for the organisational leaders and the management team to manage the business financial units and reallocate the resources for fruitful investment so that the companies would be able to manage their financial resources and maximise the brand’s objectives (Usenko et al., 2018). The aim of the study is to analyse the management accounts and the financial accounts which are playing crucial role to make appropriate organisational decision. The study also provides a scope to analyse the differences between the managing accounts and the financial accounts system in the organisational context.

Management accounts

Managerial accounts is related to the practice where the mangers use the provisions of accounting information in order to inform each other for the benefits of the organisation so that it is possible for the managers to develop appropriate decision. The management accounts include the profit and loss statement as well as key performance indicators, where the managers identify the firms’ factors which are contributing to maximise the performance. It is the summary of main financial highlights of the organisation including the furfures of gross margin, actual turnover, operating profit and cash at bank (Dang, Li, and Yang, 2018). In the management accounting system, the organisations focus on developing proper chart and scoreboard views in the monthly basis and on the other hand, it is a online version report, where there are detailed information about the product overviews, performance indicators and firm’s resources to make further decision so that the managers would be able to run the organisational operational activities strategically (Toumi, and Viviani, 2016).

There are several benefits of the management accounting; share the organisational management team is using this for better performance of the organisation as a whole. It determines the goals of the firm and develops proper strategy to fulfil it. Reducing the cost of operations and increasing efficiency are also other advantages of management accounting, where the managers are able to restructure the production sites for cost leadership strategy and improving the efficiency of producing and distributing the organisational products and services (Collis, Holt and Hussey, 2017). Additionally, managing accounts are important for the business firms to increase financial returns and maximise brand profitability in long run. the mangers aim at developing management accounting to review the performance and financial planning of the organisations and develop further strategic planning to achieve future success trough reallocating the resources, improving product portfolio, maximising efficiency and reducing the cost of operations and manufacturing (Weetman, 2019).

Financial accounts

Financial accounts is the field of accounting where the team member of the organisations try to review the financial performance and develop summary, report and analysis about the financial transactions related to the business, this is involved with developing financial planning and statement for managing the stakeholders and improving he brand financial stability in long run (Nørreklit, 2017). It is a component of the balance of account, balance sheet where current asset and liability of the organisation is analysed. The managers also aim at evaluation the Net present value (NPV) and Internal Rate in return (IRR) to identify and evaluate the organisational values at the market (Damodaran, 2016). It further helps the companies to identify the payback period to repay the loans and manage the source of finance in the organisational workplace to run the business operations successfully. The organisations also review the financial performance and cash flows for operating efficiently (Collis, Holt and Hussey, 2017). Hereby, there are advantages of managing financial accounts which are managing investment portfolio, cash flows of the firm, reviewing the balance sheet of asset and liabilities and predict the financial stability of the organisations (Toumi, and Viviani, 2016). The other benefits of financial accounts are maintaining business records, taxation, and financial statement management, calculating performance of the business over the years and making effective decision of the brand, where the multinational corporate firms can develop financial report for the stakeholders with relevant and valid information about the financial activities of the organisations (Ehrhardt, and Brigham, 2016). It further influences the managers to develop innovative decision to maximise organisational financial objectives.

Differences between management accounts and financial accounts

The managerial accounts mainly deal with estimates, rather than proven and verifiable facts. On the other hand the financial accounts refer to aggregation of accounting information into financial statements (Fracassi, 2017). The managerial account is the internal process to manage the accountant develops further management decision to run the organisation efficiently. The financial account is for external parties and the report is on the past performance of the business of the external parties. Management accounting on the other and informs the internal decisions, provides feedback on the operating performance of the organisation. It is timely conducted and future oriented, but the financial accounting process may be delayed and it is based on the historical data (Collis, Holt and Hussey, 2017). The financial account is regulated by the regulations to make sure of the inclusion of the valid and relevant data. It only measures the financial data and reports the entire organisations. However, the managerial data measures the financial and operational perforce and it can be focused on the specific areas of the business (Nørreklit, 2017). The material information can be both financial and non-financial. But the financial accounting only considers the financial information. The purpose of managerial accounting is to aid planning, controlling and decision making and on the other hand, the financial accounting is developed to record the financial performance of the specific organisation in a given period of time.

Conclusion

It can be concluded that, both the management accounting and financial accounting is important for the organisations to make effective decision, but there are deference in the accounting system. The financial accounting mainly records the past performance and managerial accounting is more important for the business to make effective decision and restructure the organisational process for achieving the financial objectives of the companies.

Reference List

• Collis, J., Holt, A. and Hussey, R., 2017. Business accounting. London: Palgrave.
• Damodaran, A., 2016. Damodaran on valuation: security analysis for investment and corporate finance (Vol. 324). New York: John Wiley & Sons.
• Dang, C., Li, Z.F. and Yang, C., 2018. Measuring firm size in empirical corporate finance. Journal of Banking & Finance, 86, pp.159-176.
• Ehrhardt, M.C. and Brigham, E.F., 2016. Corporate finance: A focused approach. Berlin: Cengage learning.
• Fracassi, C., 2017. Corporate finance policies and social networks. Management Science, 63(8), pp.2420-2438.
• Nørreklit, H., 2017. A philosophy of management accounting: A pragmatic constructivist approach. London: Taylor & Francis.
• Schroeder, R.G., Clark, M.W. and Cathey, J.M., 2019. Financial accounting theory and analysis: text and cases. New York: John Wiley & Sons.
• Toumi, K. and Viviani, J.L., 2016. How Do Ethical Principles Affect Islamic Banks Capital Structure? Corporate Finance and Regulatory Approaches. Corporate Finance and Regulatory Approaches (July 25, 2016).
• Usenko, L.N., Bogataya, I.N., Bukhov, N.V., Kuvaldina, T.B. and Pavlyuk, A.V., 2018. Formation of an integrated accounting and analytical management system for value analysis purposes.
• Weetman, P., 2019. Financial and management accounting. London: Pearson.