GODFREY M.

MONYAKENG
LEVEL 400 STUDENT
DEPARTMENT: CIVIL ENGINEERING
REPORT TITLE: FINANCIAL ACCOUNTING AND FINANCIAL
MANAGEMENT AS VERSITILE TOOLS TO MINE MANAGEMENT
LECTURER: MR ZVARIVADZAT

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 1. ABSTRACT
This report entails information on some of the key aspects of Mine Management
which are Financial Accounting and Financial Management. It also shows how the
two conjugate with one another with relevant examples from the mining industry to
achieve the overall best management in a mine. Furthermore, it looks into the
similarities and differences of financial accounting and financial management.

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TABLE OF CONTENTS
1. ABSTRACT.....................................................................................................................................2
2. INTRODUCTION............................................................................................................................4
Financial Accounting..............................................................................................................................4
Financial Accounting activities...............................................................................................................5
Financial Management..........................................................................................................................5
3. KEY DIFFERENCES BETWEEN FINANCIAL ACCOUNTING AND FINANCIAL MANAGEMENT
(MANAGERIAL ACCOUNTING)...............................................................................................................7
4. SIMILARITIES OF MANAGEMENT AND FINANCIAL ACCOUNTING..............................................10
5. DISCUSSION................................................................................................................................12
Significance of Financial Accounting and Financial Management to the Mining Industry.................12
6. CONCLUSION..............................................................................................................................13
7. REFERENCES....................................................................................................................................14

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 2. INTRODUCTION

Finance, in general, is the management of large sums of capital. It refers to financial

activities such as banking, leverage or debt, credit, capital markets, assets, and
investments. Finance is, in many ways, the foundation of the business enterprise.
Therefore, good financial management is essential to the economic health of business
companies. Financial management should be properly understood due to its
significance. This, however, is better said than done. The field is complicated, and it
is continuously evolving as a result of changes in economic conditions. All of this
makes financial management exciting and relaxing, but also frustrating and at times
perplexing[CITATION The21 \l 1033 ].
Accounting, as an information system, seeks to provide various users with various
types of valuable information in order to satisfy their various needs. As a result,
accounting aims to leverage the environment in order to increase the quality and
quantity of information as well as the distribution process to consumers[ CITATION Sao20
\l 1033 ].

Financial Accounting
Financial accounting is a specialist accounting division that maintains track of a
company's financial transactions[ CITATION Wil20 \l 1033 ]. Mining Companies practice
Financial Accounting to track, record, and report on financial transactions
by generating financial statements[ CITATION Mar21 \l 1033 ]. Mary says that it is done
using the standardized guidelines found in Generally Accepted Accounting Principles
(GAAP) rules which are set by the Financial Accounting Standards Board (FASB)
and are intended to encourage reporting accuracy, so Company A can use the same
reporting approach as Company B.
Financial accounting always looks at past performance and does not look ahead like
management accounting[ CITATION Mar21 \l 1033 ]. Financial Accounting is time specific.

Using structured rules, transactions are reported, summarized and presented in a

financial report or a financial statement, such as a statement of revenue or a balance
sheet. Companies file financial statements daily. Statements are known to be external
since they are made to individuals outside the business, with primary recipients being
owners/holders, as well as some lenders[ CITATION Wil20 \l 1033 ].

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However, if a corporation's stock is publicly traded, its financial statements appear to
be widely distributed and details would be disclosed. It is critical to note that the
object of financial accounting is not to disclose a company's worth. Rather, its aim is
to provide enough knowledge for others to determine a company's worth for
themselves.

Financial Accounting activities

In relation to the mining industry, most of the activities which in overall add up to
Financial Accounting of the mine are explained as follows:
a) Financial accounting provides the financial department of the mine to be able
to provide a record of assets owned, amounts owed to others and monies
invested[ CITATION Sao20 \l 1033 ].
b) Fabrication of Mine Financial Reports showing the financial position of an
organization and the profitability of its operations[ CITATION Sao20 \l 1033 ].This
is indirectly beneficial to a mining company because if a mining company is
largely funded by a bank, the bank is able to give a level of confidence if the
mining company is performing well and hence invite more investors to the
particular mining company[ CITATION Dev19 \l 1033 ].
c) Helps management manage the mining company[ CITATION Sao20 \l 1033 ]. This
is to say that mine companies are mainly focused on maximizing the revenues
to have large profits, and this is achieved by careful management of resources
such as assets and allocating them carefully to where they are needed and will
exponentially perform. For instance, for a good underground mining company
whose financial accounting is very good means that they have direct insight
into mineral markets, can allocate the right mining equipment for the right
prevailing geological conditions and also, they carefully monitor and disperse
the right salaries and wages for the right personnel.
d) Financial accounting provides a way of measuring the mining company’s
effectiveness[ CITATION Sao20 \l 1033 ]

Financial Management

Financial management means the planning, organization, management and control of

financial activities, such as the acquisition and use of company funds[ CITATION Raj17 \l
1033 ]. It entails applying general management concepts to the company's financial

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capital. Financial management is typically concerned with the acquisition, distribution
and regulation of the financial capital concerned. The goals may be to ensure that the
funds concerned are provided on a regular and appropriate basis, ensure an acceptable
return to the shareholders, which depends on the earning potential, the market price of
the share, and the expectations of the shareholders and make the most of the funds. If
the funds were raised, they could be used as soon as possible, at least at a cost. The
company's financial operations are one of the company's most significant and
dynamic activities[ CITATION Raj17 \l 1033 ]. Therefore, in order to take care of these
tasks, the financial manager carries out all the necessary financial activities.

The financial manager is responsible for all the company's essential financial

functions. The person in charge should remain far-sighted in order to ensure that the
funds are used in the most effective manner. Its activities directly impact the
profitability, growth and goodwill of the company.

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 3. KEY DIFFERENCES BETWEEN FINANCIAL ACCOUNTING AND
FINANCIAL MANAGEMENT (MANAGERIAL ACCOUNTING)

The main distinction between financial accounting and financial management are as
follows:

 Financial Accounting is more concerned with reporting for the purpose of

tracking performance of the Mining company in terms of determining if there
were any profits and losses incurred for a specified financial
period[ CITATION Wil20 \l 1033 ]. For example, the officer assigned to
handle the financial status in a Mining Company can be asked by the top
management to produce balance sheets and other financial statements for the
period ending October 2021 to indicate information such as; number of shares
recently purchased by either public or private investors, operating and
production costs of the mine, tax inflation rates pattern, salaries and wages
issued etc.

In contrast, Financial Management is not concerned with reporting but uses

the information from Financial Accounting to utilize and organize the
financial resources of a mining company[ CITATION Wil20 \l 1033 ]. To
understand this, the Financial Management will use strict critical analysis of
the World Mineral Market Trends and see how the financial resources (as
reported by the Financial Accounting Department) can be utilized for
economical reasons to maximize mine profits.

 Financial Accounting is a legal requirement[ CITATION Jas21 \l 1033 ]. This

is in the sense that whenever a mining company has undergone pre-feasibility
stages and has confirmed the quality and quantity of a mineral ore, it will
provide majority of the start-up capital /funding for mining operations to
commence. Part of the funding comes from the public and private investors
and the Host Country Government. And therefore, the government will require
that mining company to produce financial statements for the benefit of the host
citizens and private investors.

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 In comparison, Financial Management is not a legal requirement because it is
Flexible to the intentions of the mining company, meaning that the mining
company has its own production targets to maximize profits and this is
dictated by how effectiveness and efficiency of how the mining company
financially manages its resources[ CITATION Wil20 \l 1033 ].

 In Financial Accounting, the timeframe is more on the past to present

performance[ CITATION Sea20 \l 1033 ]. This is shown through the tracking
of a mining company’s profit and loss performance using computerized
analytical systems which use past and financial data.

However, the timeframe used in Financial Management is more on focusing

on the future[ CITATION Sea20 \l 1033 ]. This is seen through planning and
anticipation which is a critical success factor in any mining company, for
example, in the mining industry the choice of mining either High-grade or
low-grade ore is dependant on the anticipated Mineral Market Price which is
always fluctuating. The principal beauty of Financial Management will then
solve this uncertainty by applying some principles such as for instance if the
Spot Mineral Market Price of a commodity is low, Financial Management will
dictate mining of High-grade deposits in order to cover for future costs.

 In overall, the main objective of Financial Accounting is to provide financial

information using standard procedures and rules

Even so, nevertheless the main objective of Financial Management is to create

wealth, cash, and returns by effective and efficient utilization of the
company’s assets to keep the company running and appeasing to both private
and public investor firms.

 Under Financial Accounting, there is a standard procedure or

centralized system regulating reports[ CITATION Sea20 \l 1033 ].
This is more common in the Financial Statements which are the
Income Statement Balance Sheet and Cash Flow Statement. The reason

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 why there is such strict regulation is for the purpose of`legitimacy for
the release for public consumption and is highly anticipated by
investors.

Whereas Financial Management In contrast each mining company is

free to develop its own management reporting system and
regulations[ CITATION Sea20 \l 1033 ]. Hence there is no centralized
system regulating reports.

 The procedure of conducting Financial Accounting is mainly

independent and uses its own tools and techniques[ CITATION Mas17
\l 1033 ]. This means that it utilises the raw data obtained at first hand
from past to present transactions that occur in a mining company such
as the purchasing and maintenance costs of mine machinery, revenues
earned per ton of ore(high grade or low grade).
Even though from the past discussions it has been noticed that
Financial Management is more focused on the future direction of the
mining company, it should be noticed that it does not use its own tools
and techniques but rather extrapolates the data obtained from Financial
Accounting to direct the company.

 Since Financial Accounting is more on reporting Information, this very

same information is passed to creditors, investors, analysts, and
regulators (also known as External Audience)[ CITATION Mas17 \l
1033 ]. These are the stakeholders who influence Mineral Markets. For
example, Financial Accounting information is passed to investors who
will then use it to compare the actual versus the predicted profit
performance of the mining company and decide whether to keep the
company running or not, or if the mining company still needs extra
funding. Another instance could be that Financial Accounting
information passed to analysts is for the purpose of Financial
Management in order to predict the future outcomes of the company.

Whereas in Financial Management, the information is only used by the

mining company’s management to forecast its future and hence it is

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 presented to the company’s internal community( also known as
internal audience).

 From the Above differences it can be seen that Financial Accounting is

more focused on tracking the mining company’s past
performance[ CITATION Sea20 \l 1033 ]. While Financial
Management More concerned with planning and
anticipation[ CITATION Sea20 \l 1033 ].

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 4. SIMILARITIES OF MANAGEMENT AND FINANCIAL
ACCOUNTING

The two systems of accounts are similar in the sense that they are both financially
focused, produce financial reports and require a deep understanding of accounting
theory to be run effectively. The following are the key similarities between the two
systems.

Economic events are dealt in the both system of accounts to determine the general
health of the mining company. Financial accounting makes use of the formal and
strict reports for presentation to external stakeholders for example, shareholders and
board of directors .Management accounting is more informal as most of the times is
internal, however, even with this differences, both the system of accounting intends
on allowing the reader to draw a conclusion on the health of the mine and
subsequently make informed financial decisions needed for the good of the mine.

Both are parts of total accounting information system. The accounting information
system is important to both types of accountants. The management accountant will
use the information from the accounting system to present data to managers while the
financial accountant will use the system to audit their financial reports.

Both systems draw on the same set of items which are financial statements, revenues,
expenditure, assets, liabilities and cash flows. In managerial accounting, corporate
personnel attempt to reflect on production effectiveness of a mine and rein in costs.
Similarly financial accounting initiatives assist companies in monitoring income
statements items, for example, materials cost and administrative expenses. These are
all concerned with determining the financial stand of a mine.

Both financial and management accounting are accumulating, and they classify the
accounting information for the preparation of financial statements. Management
accounting systems provide the cost data and inventory valuations that are used to

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support financial reporting and, in this sense, are subordinate to financial reporting
[ CITATION Ric02 \l 1033 ]. According to Richardson, there is no question that
management accountants and financial accountants share a common knowledge base
at a basic level.

Under both system database is used to prepare financial statements and reports. The
reports prepared in management accounting and financial accounting are based on the
same database which re originally created to fulfill the accounting and reporting
requirements of financial accounting. This is the reason that when the accounting
system in a mine collects and classifies information, it does it in such a way that it can
be appropriate for both accounting systems.

Both systems determine and measure costs for different accounting periods and even
for different departments and sections. They use the same accounting principles and
concepts for the purpose of cost accumulation and cost allocation .The concepts and
principles which are used in the area of financial accounting for the purpose of cost
accumulation in the mine may also be used under management accounting. This
means that any principle which is developed for financial accounting, can be used in
preparation and analyses of reports in management accounting if they are found useful
for managerial purposes.

Figure 4.0. Showing the interrelation of Financial accounting and Financial

Management.

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 5. DISCUSSION

Significance of Financial Accounting and Financial Management to the Mining

Industry

From the previous discussions it is realized that Financial Accounting and Financial
Management act as a requisite to a mining company’s progress. This should be
understood in the sense that no matter how much Capital a mining company
possesses, in the absence of the practice of Financial Accounting will result in a
disastrous event which disadvantages the ability of the mining company to operate
economically. For example, in a particular nation there are laws which govern the
mineral economics entailed in mineral policies and laws. And therefore, a mining
company which is partially funded by the government and its banks may require it to
annually publish financial reports. If this is not done, it results loss of trust in the
company by the public and private investors.

Financial Accounting provides the accuracy accountants need to measure the solidity
of a mine, for example, a mine that extracts a mineral of low grade will mean that
they are not making enough of the profit from their sales. This will mean that at times
the mine is running at a loss since it cannot cover most of its expenses. However,
using financial accounting a mine is able to identify its area of weaknesses in their
finances and try to rectify the mistakes. This will enable it to come up with remedies
on how they can run the mine profitably and ensure that it stays solid until its life.

A related trend in both management and financial accounting is a focus on

risk[ CITATION Pow04 \l 1033 ]. The concept of risk draws attention to possible
future outcomes and contingencies for the organization and whether the organization
can withstand shocks, react constructively to challenges, and be innovative to meet
new challenges. The financial statements with their traditional backward perspective
have been inadequate to provide insights into this aspect of corporate performance.
Recent experiments in corporate financial reporting such as sustainability reporting
(and related reports on corporate social responsibility, environmental and social
impact, and intellectual capital) have begun to provide a more useful data on these
dimensions but, in this case, the assumption is that management is developing

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information systems to support mine resilience and investors would find disclosure of
this information value relevant.

6. CONCLUSION

Finance and Accounting have assumed a great importance in this contemporary world
of business wherein corporate organizations have to show a fair and genuine view of
their financial standing. Thus the application of accounting in the mining sector has
become an indispensable factor. Although they may be contrasts between these two
concepts, in the sense that financial accounting is more concerned about historical
information whilst financial management focuses more entirely on the present and the
future, the mining corporate world will need both financial management and
accounting in order to thrive. This is because financial management provides direction
to the mines on how they can attain goals and objectives of the mine through proper
allocation, acquisition and planning. Both accounting systems analyses the economic
events to determine the general health of the mining company

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Power, M. (2004). The Risk Management Of Everything. Re-thinking the politics of uncertainity.
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