Dyson (2010) observes that accounting plays a particular andimportant role in the provision of a service for a business, relating to thecollecting, storing and summarising of data, which is mainly financial, andthen conveying this information to a variety of main users who will be usingthe information for different purposes. In this regard, financial and managementaccounting, two of the main areas ofaccounting, both play key roles for a business in terms of providinginformation to relevant parties, however, the methods vary in relation to theirusefulness and reliability. This assignment will compare and contrast thesemethods of accounting in terms of their reliability and usefulness.UsefulnessFinancial accounting is involved with the upkeep of theaccounting records, financial control and development of the accounts todetermine the amount by which income earned has exceeded expenses incurred andthereby presenting a snapshot of a business’s financial position. This isprovided through the three key financial statements; Income and ExpenditureAccounts, Statement of Financial Position (formerly known as Balance Sheet) andthe Cashflow. In this regard, year-end financial statements provide informationin relation to how a business’s money was earned and spent in the year.
Thestatements will also reflect the cash flow, in and out, of a business throughoutthe year. In this regard, financial accounting and the information it provides,assists in measuring a business’s financial performance in a certain period oftime (IPA, 2012). Management accounting, on the other hand, while stillfocussing on the provision of accounting information and records, focusses onthe costs of a business in its continuing operations and activities,incorporating other non-monetary and statistical data to assist in thefunctions of costing, budgetary control and investment appraisal for thebusiness (IPA, 2012). The report timing between the two accounting methods alsodiffers. Financial accounting information is generally only issued at the endof a reporting period. In contrast, Management Accounting information, such as costaccounting information can be provided as and when required by management.