Financial accounting is also known as financial accountancy, is the field accounting which is concerned with the preparations of financial report or statement for the decision makes like suppliers, stock holders, stakeholders, owners, government agencies, employees, banks etc. Financial capital maintenance could be measured or calculated in either units of CPPA (constant purchasing power) or nominal monetary units. The basic requirement for the financial accountancy is to lessen the agency dilemma by measuring and monitoring the agent’s performance and then reporting the outcomes to the interested users.
Financial accounting is generally used to create accounting data for the people outside the business organization or those who not involved in the day to day operations or running of the business organization. Managerial accounting offers accounting data in order to assist the managers to make decisions and to manage the company or business.
In brief, financial accountancy is the method of summarizing the financial data taken from the business organization’s records and then publishing in the form of annual reports or statements for the benefits of the individuals outside the business organization or company. Financial accounting is governed by both the international and local accounting standards.
The main purpose of accountancy is to offer the data which is necessary for accurate economic decision making, where as the main purpose of the financial accountancy is to prepare financial statements which give data about the business organization’s performance to outside parties like tax authorities, creditors and investors. Management accounting contrast with the financial accountancy in that, the management accountancy is for those who are within the organization or internal decision making and it does not have to follow any regulations issued by the standard setting bodies.