Managerial Accounting vs. Financial Accounting​: What’s the Difference?

The most common accounting specializations are financial accounting, management accounting, public accounting, tax accounting, and auditing. Specializing in one of these areas of accounting will shape your education, professional skills, and career path.

What’s the difference between managerial accounting vs. financial accounting? Managerial accountants create financial documents for internal use, while financial accountants create public financial documents. Both generally follow professional standards and rules, but managerial accounting also follow internal or organizational reporting standards.

Understanding the difference between these fields can help you determine your next career move — and decide between a degree in management accounting or financial accounting.

Financial Accounting: Financial accounting analyzes financial information to create financial statements. For example, financial accountants prepare balance sheets, cash flow statements, and income statements. These reports help managers, executives, and investors make decisions. This specialty requires strong financial reporting knowledge to ensure that organizations comply with regulatory and legal requirements.

Management Accounting: Management accounting uses financial data to create financial forecasts that inform strategic planning. Drawing on expertise in cost accounting and forecasting, management accountants support internal financial management. For example, their reports can help managers allocate resources or make capital investments. The financial insights generated by management accounting support the strategic decision-making of organizations.

In terms of managerial accounting vs. financial accounting, the two specializations share key similarities. Both of these branches of accounting create financial documents that can shape business operations. And both require strong analytical and critical thinking skills.

In either specialty, accountants follow similar educational and career advancement paths. Both offer professional certifications that can showcase specialized expertise.

However, while financial accounting emphasizes deep analysis into past financial performance, managerial accounting focuses on future financial performance. As a result, these different accounting specialities use similar skills to reach different goals.

Financial Accounting: The goal of financial accounting is to create accurate reports of an organization’s financial performance. These financial documents must follow generally accepted accounting principles (GAAP). Financial accounting analyzes and reports on historical financial data, while management accounting focuses on future forecasting and decision-making.

Management Accounting: The goal of managerial accounting is to create financial documents that organizations can use to make strategic decisions. While financial accounting reports emphasize external reporting, management accounting reports remain internal within an organization. Managerial accounting generally follows national standards (GAAP or cash-basis accounting) as well, and incorporates internal organizational rules and metrics to support management reporting and forecasting.

Financial and management accounting share similar education requirements. Both career paths typically require a bachelor’s degree for entry-level roles. Majoring in general accounting can prepare graduates for either career. However, there are some important differences in the educational path for financial and management accountants.

Financial accountants need a bachelor’s degree to enter the field. Degree-seekers with a clear career goal benefit from pursuing a financial accounting concentration. Some colleges do not offer a financial accounting concentration at the undergraduate level. In that case, students can take financial accounting electives as well as courses in finance and economics.

At the graduate level, many universities offer financial accounting degrees. A general accounting master’s program can also provide valuable training for financial accounting careers. Financial accountants who want to earn a CPA license may need to complete additional coursework after finishing a bachelor’s degree, depending on their jurisdiction. A graduate certificate or a master’s in financial accounting or public accounting can meet the requirement.

Management accountants can enter the field with the same education as financial accountants: a bachelor’s in accounting. While a bachelor’s degree is the minimum educational requirement, students can benefit from completing coursework in management accounting.

Completing a management accounting concentration can provide focused training in strategic planning and financial forecasting. Undergraduates can also take electives in management accounting, accounting analytics, and strategic financial analysis.

Because most colleges do not offer an undergraduate management accounting major, you may pursue graduate education to expand your knowledge. A graduate certificate or a master’s in management accounting strengthens the strategic and analytical skills needed for careers in this career.

Explore the financial accounting and management accounting areas of study:

Many accountants pursue professional certifications to showcase their expertise and advance their careers. Financial accountants often see the CPA credential as the most vital for their careers, while management accountants are more likely to become certified management accountants (CMAs). The best certification depends not only on the accountant’s specialization but also on their career goals.

Financial accountants specialize in creating reports for shareholders, regulators, and other types of public reporting. As a result, the CPA credential is the best certification for financial accountants. CPAs are specialists in financial accounting and reporting. This credential requires passing scores on four exams and at least 120 college-level credits.

Other certifications that appeal to financial accountants include the certified financial planner (CFP) and chartered financial analyst (CFA) credentials. CFPs manage investment portfolios to help clients reach financial goals, while CFAs manage larger investment portfolios. As with other certifications, candidates typically must meet education, experience, and exam requirements.

Management accountants benefit from several specialized certifications. Offered by the Institute of Management Accountants, the CMA credential demonstrates experience in management accountants. Candidates for the CMA credential need at least two years of full-time experience in managerial accounting or financial management. The certification also requires passing scores on a two-part exam.

Other certification options include the chartered global management accountant (CGMA) credential. Offered by the Chartered Institute of Management Accountants, candidates must pass a multi-part exam to become a CGMA. However, licensed CPAs can skip several steps when pursuing this credential.

Both career paths have similar progressions from staff accountant to senior accountant and accounting manager. Yet the specific job titles and career progression depend on the branch of accounting.

Within financial accounting, professionals may start as staff accountants before advancing to titles such as senior financial accountant. With experience, financial accountants can move into more advanced roles such as financial controller. Financial controllers oversee the financial reporting for organizations, often managing teams of accountants and auditors.

Financial accountants can further specialize in several areas. They can also use their financial reporting skills to become internal or external auditors and ensure that organizations comply with financial regulations.

Within management accounting, professionals hold diverse entry-level job titles. A cost accountant analyzes spending to create budgets and revenue forecasts, while an operational accountant creates revenue and expense reports to make financial projections. Both roles require strong managerial accounting skills.

Other tracks also draw on a similar skill set. Budget analysts track spending to help organizations improve efficiency, while financial analysts use financial data to mitigate risk and capitalize on opportunities.

With experience, management accountants can move into management and executive roles, including top positions that impact strategy, such as chief financial officer.

The best accounting specialty for you depends on your interests, strengths, and goals.

Managerial and financial accounting share many similarities. Both require a bachelor’s degree and strong analytical skills. Both emphasize financial analysis and documentation. If you’re new to accounting, you can take a similar educational path to either career. Gaining experience in entry-level financial or management accounting roles can help you decide where to further specialize.

For those who already work in accounting, consider your existing strengths and professional goals. For example, if you gravitate toward financial reporting and auditing, financial accounting might be a better fit. On the other hand, if you prefer using financial information to inform strategic decisions, management accounting could make more sense.

Financial accounting and management accounting offer equally good career paths. By considering which aligns better with your strengths and ultimate goals, you can make an informed decision about your next step.