CIMA BA3 Syllabus A. ACCOUNTING PRINCIPLES, CONCEPTS AND REGULATIONS - Financial information produced for the different users - Notes ^{5 / 22}

Bookkeeping

is the recording of monetary transactions in the financial records of an entity

Every sale, purchase or other transaction will be classified according to its type, and will be recorded in the 'books'. 

The 'books' will contain a record of each item showing the transactions that have occurred, enabling management to track the individual movements on each record

Periodically, a list of the results of the transactions is produced. 

This is done by listing each account and its final balance. 

The list is known as a trial balance and is an important step prior to the next stage of providing financial statements.

Financial accounting

is the classification and recording of monetary transactions of an entity in accordance with established concepts, principles, accounting standards and legal requirements, during and at the end of an accounting period.

1. Financial statements must comply with accounting rules published by the various advisory and regulatory bodies. 

   The reason for this is that the end product of the financial accounting process—a set of financial statements—is primarily intended for the use of people outside the organisation. 

   Without access to the more detailed information available to insiders, these people may be misled unless financial statements are prepared based on uniform and consistently applied principles.

2. Financial accounting is partly concerned with summarising the transactions of a period and presenting the summary in a coherent form. 

   This again is because financial statements are intended for outside consumption.

Management accounting

Management accounting is the process of identification, measurement, accumulation, analysis, preparation, interpretation and communication of information used by management to plan, evaluate and control within an entity and to ensure appropriate use of and accountability for its resources.

1. Management accounting also comprises the preparation of financial reports for non-management groups such as shareholders, lenders, regulatory agencies and tax authorities.

   Although the needs of external users of accounts are addressed in this definition, it can be seen that the emphasis of management accounting is on providing information to help managers in running the business.

2. The kind of information produced and the way in which it is presented are at the discretion of the managers concerned; they will request the type of information in the format they believe to be appropriate to their needs.